I lost my rental and now need to buy a home. Does that qualify for a CRD?
I have a question from a client that is asking about the early distribution from a 401K plan. She is a renter. The home owner where she rents is selling the house because of what is happening in the country between COVID and the election. My client will need to leave the house. She is planning on purchasing another home and needs to pull out money from her 401K. She does not want to get hit with the 10% penalty. I am not able to get a hold of anyone from IRS, nor does it fall into any of the standard categories. Do you have any insight on if this may be covered to avoid the 10% penalty?
Permalink Submitted by Alan - IRA critic on Tue, 2020-08-11 14:30
This would not qualify for a CRD. The latest CRD definition under Notice 2020-50 is mostly related to loss of income related to employment. This wouldn’t qualify even if she owned the house and wanted to sell it. However, if this is a 401k from a former employer, she could do a direct rollover to an IRA, and if she also qualified as a first time homeowner (not owning within prior 2 years), she could withdraw up to 10,000 from the IRA without penalty. Of course, 10,000 is often not enough to make a difference. Since mortgage rates are now at a record low, perhaps she takes as large a loan as possible – or just continues to rent elsewhere.