I was informed that any loan balance taken from your 401K must be repaid in 30 days from, termination, quitting or taking retirement. What I am trying to find out is, what if you are unable to repay the remaining balance within the 30 days. What penalties do you incur? Are these penalty fees automatically deducted form your 401K? Any way around the penalties? Can you repay from your own funds monthly just like they deduct from your paycheck to repay? Who can I contact to get the specifics?
What are penalties for non repayment of 401K loan?
- Thread starter jcom7
- Start date
A
anonymous6
Guest
call the 1-800-line for prudential retirement and ask them. it won't be good news.
You will have to pay income tax , on the outstanding balance. Plus a 10% penalty if under 59 and a half! They are not deducted from your 401k but they will be due when you file income tax
UpstateNYUPSer(Ret)
Well-Known Member
This is the right answer. The loan will be treated as a withdrawal and as such will be taxed as ordinary income. They will also tack on a 10% penalty, which you pay along with your taxes.
You can repay with your own funds; however, you must repay the entire balance in a lump sum----no payment plans allowed. Payment of a partial amount now could reduce the amount that you would have to pay taxes on later.
There are no ways around the penalties.
This is from the Prudential website:
You must repay the loan in full within 90 days after termination or it will be considered a taxable event, subject to all current taxes and any early withdrawal penalties.
You can call 1-800-537-0189 but I am afraid that they will tell you the same thing that I just did. (They might use bigger words but the message will be the same)
You may want to Google "IRS Payment Plan".
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