Roz/Amanda - Retirement question...

Kristie · 04-03-2005, 08:33 PM

ok you two, i know one of you or both of you knows the answer to this question...

what exactly does it mean if your "defaulted" on a retirement loan? seems my ol' man has more debt than i thought in the aspect of 4 defaulted retirement loans...

AIGH! [img]images/graemlins/965.gif[/img] [img]images/graemlins/speechless-smiley-040.gif[/img]

Amanda · 04-03-2005, 10:17 PM

It's not as bad as you think. He had a retirement plan w/ a loan and then left the company (I'm assuming) abd did not pay off the loan? It will not affect his credit whatsoever. It means that he didn't pay a retirement plan loan back so it defaults automatically. It is seen as a withdrawal by the gov't. This means it will be taxed as ordinary income and he will receive a form 1099 next January.

I reread this and I hope it makes sense. Plenty of people leave their companies without paying back their retirement loans. The downside is that the loan balance is added to his taxab;e income for the year. Depending on the balance, he may be pushed to a higher tax bracket. But again, it will not affect his credit rating.

Kristie · 04-04-2005, 12:27 AM

I've noticed that it didn't affect his credit rating....I guess he defaulted back in 2001 so I suppose he would have already paid the taxes on it then? I was just wondering if he didn't pay the taxes...i suppose the IRS would be coming after him then right?

but he still has to pay it back does he not or is it simply a withdrawl and that's all there is to it? that's like he's losing 2/3 of his retirement fund.. oh well, guess he'll have to work a lot longer then!

however, with him being taxed by defaulting - doesn't it mean he's taxed like double or triple because of all the penalties also involved?

roz · 04-04-2005, 06:59 AM

He doesn't have to pay it back. He would have received a 1099-R to file with his taxes to declare it as ordinary income on his 1040.

Did he change employers?

Kristie · 04-04-2005, 08:24 AM

nope, but the loans are from an existing already vested retirement fund from a previous employer.

it's good to hear (in a way) that he won't have to pay it back, that puts his debt back down in the 20's vs the 70's!

04-03-2005, 08:33 PM	#1 (permalink)
Kristie Admin/Owner Join Date: Jul 2003 Location: Scottsdale, Arizona Posts: 6,631 Recipes: Thanks: 7 Thanked 17 Times in 17 Posts	Roz/Amanda - Retirement question... ok you two, i know one of you or both of you knows the answer to this question... what exactly does it mean if your "defaulted" on a retirement loan? seems my ol' man has more debt than i thought in the aspect of 4 defaulted retirement loans... AIGH! [img]images/graemlins/965.gif[/img] [img]images/graemlins/speechless-smiley-040.gif[/img]

04-03-2005, 10:17 PM	#2 (permalink)
Amanda Jetgirls Plus Member Join Date: Dec 2003 Location: PHL suburbs Posts: 2,140 Recipes: Thanks: 12 Thanked 11 Times in 11 Posts	Re: Roz/Amanda - Retirement question... It's not as bad as you think. He had a retirement plan w/ a loan and then left the company (I'm assuming) abd did not pay off the loan? It will not affect his credit whatsoever. It means that he didn't pay a retirement plan loan back so it defaults automatically. It is seen as a withdrawal by the gov't. This means it will be taxed as ordinary income and he will receive a form 1099 next January. I reread this and I hope it makes sense. Plenty of people leave their companies without paying back their retirement loans. The downside is that the loan balance is added to his taxab;e income for the year. Depending on the balance, he may be pushed to a higher tax bracket. But again, it will not affect his credit rating.

04-04-2005, 12:27 AM	#3 (permalink)
Kristie Admin/Owner Join Date: Jul 2003 Location: Scottsdale, Arizona Posts: 6,631 Recipes: Thanks: 7 Thanked 17 Times in 17 Posts	Re: Roz/Amanda - Retirement question... I've noticed that it didn't affect his credit rating....I guess he defaulted back in 2001 so I suppose he would have already paid the taxes on it then? I was just wondering if he didn't pay the taxes...i suppose the IRS would be coming after him then right? but he still has to pay it back does he not or is it simply a withdrawl and that's all there is to it? that's like he's losing 2/3 of his retirement fund.. oh well, guess he'll have to work a lot longer then! however, with him being taxed by defaulting - doesn't it mean he's taxed like double or triple because of all the penalties also involved?

04-04-2005, 06:59 AM	#4 (permalink)
roz Jetgirls Ol' School Member Join Date: Oct 2003 Location: Philly Posts: 2,256 Recipes: Thanks: 0 Thanked 6 Times in 6 Posts	Re: Roz/Amanda - Retirement question... He doesn't have to pay it back. He would have received a 1099-R to file with his taxes to declare it as ordinary income on his 1040. Did he change employers?

04-04-2005, 08:24 AM	#5 (permalink)
Kristie Admin/Owner Join Date: Jul 2003 Location: Scottsdale, Arizona Posts: 6,631 Recipes: Thanks: 7 Thanked 17 Times in 17 Posts	Re: Roz/Amanda - Retirement question... nope, but the loans are from an existing already vested retirement fund from a previous employer. it's good to hear (in a way) that he won't have to pay it back, that puts his debt back down in the 20's vs the 70's!

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)

Similar Threads
Thread	Thread Starter	Forum	Replies	Last Post
I have a question	Brenda	With Love On The Rocks	7	02-22-2005 12:57 PM
Could it be - Kids in retirement?	Kristie	While Raising...People	4	11-10-2004 05:31 PM
Fertility Friend Question	jamauk	While Raising...People	6	08-22-2004 10:12 AM
Ethical question!!	Bigsweetie	Aviation Topics	7	03-29-2004 10:50 PM
DUMB Question!!! (Help for DH's present)	biochemtine	Special Occasions & Holidaze	6	01-02-2004 02:52 AM