401k w/ outstanding loans
If you have a 401k with an outstanding loan, and are under 55, are you able to take a distribution from that 401k without causing the whole loan amount to all be taxable in the year of distribution. Basically, take a distribution under the CARES ACT and use that money to repay the monthly loan payments while waiting for unemployment to kick in.
Permalink Submitted by Alan - IRA critic on Wed, 2020-04-29 17:03
If your 401k plan has adopted the CARES loan provisions, you can cease loan payments for the rest of 2020 and these payments can be delayed for up to one year. If your plan does not allow that, determine if it allows CRDs, for which you otherwise qualify if you were laid off due to Covid 19. It’s a matter of determining what your plan allows, then making the best decision among those options. Note that a plan loan must still be repaid, but a CRD does not and a CRD that is not repaid is still penalty free.