Re: Question on 401 k loan
check with the terms of the loan
most likely you will have 30 or 60 days after you leave your job to repay the entire loan or it's considered an early withdrawl, which means you get the tax and a 10% penalty.
I'd take out another loan to pay this back, if it were me, esp if your career move will mean extra money.
Re: Question on 401 k loan
The basic premise behind 401k laws is that money which would normally be taxed immediately is allowed to be deposited in a 401k account without tax - at which point the untaxed money can earn interest, which would also normally be taxed immediately but is also allowed to be deposited in the 401k account without tax - all for the purpose of funding a person's retirement. When that money is in fact used for any other purpose, then all of the avoided taxes on the deposited money become immediately due, as well as a penalty being applied to recoup some of the compound interest earnings which resulted from the principal being untaxed money.
Emily is correct that there is a 60 day 'grace period' provided under the law to allow the account holder to 'roll over' the balance of a 401k account into a new/different retirement account of any approved type. However, if the 60 days passes and the original 401k balance is not present in a new/different retirement account, the gov't interprets this as a distribution of funds for other uses which triggers income taxes on the entire 'withdrawn' amount plus triggers the tax free compound interest penalty.
Emily has made a very workable suggestion that taking out a new loan of any type, and using that borrowed money to replace the original amount of the 401k in a new/different retirement account within 60 days, is virtually the ONLY way that you can avoid the income taxes and tax free compound interest penalty from kicking in.
Keep in mind also that any 'borrowed' 401k money which is not replaced within 60 days, will be considered additional taxable income to the account holder. Not only will taxes become immediately due on this amount, but this amount will be added to the account holder's regular income for purposes of determining their overall effective tax rate. Thus if for a wild example you will earn $50,000 in paychecks this year, and if the outstanding 401k loan was for say $25,000 which you don't/can't repay and roll over, your taxable income will be considered $75,000 this year instead of $50,000. So not only will you wind up paying a 30% tax on the $25,000 401k distribution, but you'll also wind up paying a 30% effective tax rate instead of 20% on your $50,000 in paycheck earnings as well - which could cost you an additional $5,000 in income taxes on your $50,000 paycheck earnings apart from distributed 401k taxes of about $10,000 and the $2,500 penalty. Thus if you do NOT take out another loan to restore the borrowed 401k funds, instead of netting say $40,000 after taxes on a $50,000 paycheck income, you'll only net $35,000 after taxes on your $50,000 paycheck income, plus you'll owe $12,500 in taxes and penalty on the $25,000 'paper' 401k distribution (which you have already borrowed and spent), leaving you with a net after tax amount of $22,500 this year instead of $40,000.
I actually prefer the Roth IRA, which in effect holds 'after tax money' which is allowed to earn tax free interest, which under most circumstances can be withdrawn early for a 'good reason' without triggering massive taxes and penalties, and which will NOT count as additional taxable income when you withdraw the money after retirement, compared to straight-up 401k's and conventional IRA's.
Of course, if your particular 401k plan includes a 'free' annual gifts of retirement contributions from your employer or matching contributions from your employer, then you simply can't afford NOT to take advantage of your employer's 'free' money gifts. But where a person is self-employed, such that no 'free' gifts will be forthcoming, IMHO the Roth IRA offers a number of advantages.
~