good morning:biggrin1:

just wondering...did anyone use their 401k to pay for the surgery?

trying to get as much info as i possibly can!

thanks,

cutiern:D

Yes, I used my 401K for my surgry. I had no other choice. I am glad I did too.

I am using my 401K... unless by miracle my appeals work. I'm taking out a "loan" from my 401K under the Medical Hardship provision. I will be repaying it over the next 5 years with interest.... This way, I don't have to pay a tax penalty... Here's some info from smartmoney.com that I found... This is pretty much my scenario to a tee...

"Loans

These days, about 82% of 401(k) plans have loan provisions. That means you can borrow money from your nest egg and pay it back to yourself without incurring penalties. Typically you're allowed to borrow up to half your vested account balance, but not more than $50,000. You have five years to pay back the loan, usually at competitive interest rates, and you can take even longer if the money is going for the down payment on a primary residence.

Most companies don't restrict how you use the money. Better yet, getting it is a snap: There's no credit check since the funds in your account serve as collateral and many of the bigger plans now are automated, so all you have to do is call in your request, and you'll be sent a check in a few days. You pay interest as well as the principal on the loan to yourself, usually through an automatic payroll deduction. Plans are required to charge a market rate (usually prime plus one or two percentage points), but funds go right back into your account."

I chose this option because I just payed off my land that I hope to build my "dream house" on in the next year or two and I didn't want to impact my credit by having to get a loan for the surgery... Its not the ideal situation, but I felt it was my best option...

hi kim and melva,

i was looking at my 401k the other day and i did see something on there about "hardship". but, i don't want to worry about having to pay it back. i mean it is my money and i don't mind paying taxes on it.

cutiern

Well the nice thing about doing that is that you are loaning yourself the money. and the intrest is being paid to you. so it really is a wise decision. it does not affect your credit,and the money is not going into a black hole somewhere. you are essentially getting the surgery for free. if we had enough in our 401k we would do that ourselves.

hey guys..

i'm reading over my 401k and it says "...supporting documents providing proof of your need for a financial hardship withdrawal will be required..."

how am i supposed to do this???

cutiern

The draw back of borrowing money from your 401K is you usually have a higher intrest rate and you do not earn money on the borrowed amount. Most financial agents would advice you to take a personal loan instead because of these reasons.

My daughter got a Capital One Cosmetic loan yesterday. $15,000.00 for 24 months at 3.9% interest. They also have longer terms and shorter terms. She called in her application and was approved 2 hours later.

The hardship is if you had to take all the money out of your account. Then you have to pay a taxes on that. If you get the loan it does effect the hardship part. Also keep in mind that you will get a tax refund if meet the 7.5 % also keep in mind you can use the medical flexspending account at work also for paying also.

Chris in St. Louis

Pre-Lap Band

thanks for the info guys!!

but, chris you have to excuse my stupidity when it comes to stuff like this, but what do you mean 7.5%? of what?

cutiern

You take 7.5% of your adjusted gross income and after that amoutn you can deducated off your taxes. Take a look at medical ded. under the IRS regs.

Chris

good morning ya'll!!!:bananadoggywow:

maybe i should ask this question, because i'm still confused when it comes to this 401k stuff:confused:. me being a self-pay and all...if you were in my situation..would you take the route of dipping into your 401k? or, would you take a loan from the bank?

cutiern:D

Should you tap your 401K for the loan?

What is the interest rate and length of your 401K loan?

What interest rate would you have earned keeping the money in 401K?

Add these together for true rate it cost you.

Compare this to Interest paid on loan from Bank, Home Equity Loan, or Cosmetic Loan like Capital One or other.

No, I used $$ in my medical reimbursement account through my job. Actaully, I put $5k in mine and $5k in my dh's accounts and used that moola. I had surgery in Mexico.

fiveholt714, You must mean your flexible spending account. This is money you save pretaxes for medical expenses.

cutiern, where are you planning to have your surgery?

I'm using money from my 401K. My thinking is that if I don't get weight off I won't make it until retirement or I won't be healthly enough to enjoy it. Invest in yourself you are worth it!

Questions like this are so hard to answer because it depends so much on your financial situation, other avenues available, your ability to make payments, credit score, etc.

Just keep in mind that situations change, regardless of how good intentions are, and make sure you know as much as you possibly can before making a decision.

For example, understand what your tax penalties are going to look like if, for some reason, you don't manage to replace the money you borrow out.

Understand how your cafeteria plan works and make sure you're using it as much as you can if you know you will be self-pay (and even if you won't -- I don't use mine because I never wanted the risk of losing the money and I don't mind paying the taxes on the relatively small amount of would-be withholdings -- but if my situation were different or I were on a tight budget and knew I would have at least X in copays & OOP expenses, bet your butt I'd be using it).

Understand the total payout differences between what a low APR loan would run you vs. what your 401k interest will.

And also - having a loan in your name doesn't necessarily impact your credit rating, so if that's an avenue you'd wan tto consider there's no reason to rule it out completely. If you have a good record of paying on time, especially significant loan amounts, it can actually raise your score.