Rental Property Investor · Indianapolis, IN · Member since 2011 · 31 posts · 6 votes
Hi BP,
I'm currently fixing up my primary residence to make it rent ready within the next year. I'd like to add on to one of my bathrooms and renovate my 3-seasons room as well. I looked into taking out a home equity loan, have about $30k available, to fund this project OR withdrawing from my 401(k) (return of life of the account is 6%) . I understand the penalties related to withdrawing funds early from a 401(k) but is it worth it versus taking out a loan? Any advice would be much appreciated, thanks!
Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
9y
Danny, in addition to paying the penalties on early withdrawal from your 401k you will have to pay ordinary income tax. This will likely raise your tax bracket so you will end up paying even more in taxes. I would suggest look for others options.