Q. Can I roll a 401k loan into an IRA?
A. No, if you are leaving your job but still have a loan from your 401(k), you can NOT roll your 401(k) into an IRA and pay off the loan to the IRA.
The reason is the law does NOT allow loans from IRAs. When you leave your job, typically employers require full repayment of 401(k) loan within 30 days to 60 days of departure from a job. If the loan is not repaid, it will be considered a default and you will owe income tax plus 10% Federal tax penalty if you are under age 55.
A. No, if you are leaving your job but still have a loan from your 401(k), you can NOT roll your 401(k) into an IRA and pay off the loan to the IRA.
The reason is the law does NOT allow loans from IRAs. When you leave your job, typically employers require full repayment of 401(k) loan within 30 days to 60 days of departure from a job. If the loan is not repaid, it will be considered a default and you will owe income tax plus 10% Federal tax penalty if you are under age 55.
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