I ‘Raided’ My 401(k) To Save My House—and I Don’t Regret It

Like a lot of Americans recently, I was forced by a sudden shift in financial circumstances to pull money out of my 401(k). I did so the afternoon I got laid off, in late 2024, with approximately zero hesitation. 

You could say I “raided” my 401(k), but what I actually did wasn’t nearly so exhilarating. I took what’s called a loan offset distribution, which is essentially an early withdrawal. Retirement, for me, was still a dozen years away. I’m old, but not that old.

Yes, the personal-finance rulebook considers retirement savings sacrosanct. I knew I was supposed to wait. As I have discovered, however, there’s planning, and then there’s life.  

Apparently, I’m not alone in viewing my retirement savings as a dire-emergency fund. Vanguard reported that 6 percent of participants in its retirement plans took a hardship withdrawal in 2025, up from 4.8 percent in 2024. The top reason? Avoiding foreclosure or eviction. I can relate.

Home economics

After receiving the news that I was losing my job, my first thought as I returned to my desk to finish my $19 salad was, “Oh, crap! I’M GOING TO LOSE MY HOUSE!” Catastrophe felt inevitable. 

A house is just a house, sure, but the roots I’d put down from this one over the last decade run deep. My block of brick rowhouses in Jersey City, New Jersey, feels like Sesame Street. It’s home to 21 kiddos, each bringing their own vibrancy to the joyful sidewalk bustle. Two of them are mine. I walk my son to his grade school two blocks away, my daughter walks five blocks the other way to her school, our grocery store is around the corner, across from the coffee shop, and the pizza place serving slices that drape off the plate is a block in the opposite direction. But the most important geographical fact is that my kids’ mom lives directly across the street. 

She and I have worked hard to make the reality of divorce as humane as possible for our children, and we’re proud of that. From his bedroom window across the street, my son can wave at me sitting on my couch. 

No, I couldn’t afford to lose this house—at least not yet—but I also couldn’t afford it—at least not for long. Truth is, the mortgage payment was suffocating even with a paycheck. So after the initial jolt, I started running the numbers. 

Here piggy, piggybank!

The cash value of my whole life insurance policy equaled about six months’ worth of mortgage payments, so I could borrow that. Unemployment would cover about a month and a half. I was due a sprinkling of severance, expecting a sizeable tax return, and I already had a few projects in the works. Taking the 401(k) loan was a tactical move to buy a few more months of runway. At the time, I thought my window would close once the plan processed my separation, and I didn’t want to risk waiting to find out whether I’d need the funds. 

The median hardship withdrawal among Vanguard’s plan participants in 2025 was $1,900. If only that were all I’d taken. My offset loan distribution came out to $15,878. I’d have to pay income tax on that, but, hey, at least I’d be in a lower tax bracket! And since I had turned 55 the year of the separation, I’d avoid the 10 percent penalty for early withdrawal—an exemption known as the Rule of 55.

Did I make the right call? It’s tough to weigh wealth on paper earmarked for some future life that may or may not ever materialize. It would be nice to have an objective opinion. Luckily, I know a guy.

Assessing the damage

For some perspective, I reached out to my financial advisor, William Cirksena, SVP of retirement planning at MDRN Capital. He knows my entire financial picture, though he didn’t come on board until after I took the loan. In other words, he can’t be blamed for my choice.

He said because I had a bucket of liquid savings in the life insurance policy, he would’ve advised me to reposition my 401(k) into the plan’s stable value investment option, and leave it. “That way it’s safe, but you’re still going to earn some interest,” Cirksena said. “The plan would be to deplete your cash first, and then if you still needed it, take the 401(k) withdrawal; but if you didn’t, there’s no point in taking it out because then you’re paying undue taxes.” 

I hadn’t realized that I could have simply taken a withdrawal from my 401(k) after the separation; the Rule of 55 would still have applied, said my guy, so long as I didn’t do a rollover. (Makes me regret a sizeable rollover a few years back.)

I also wish I’d applied for a home equity line of credit, or HELOC, before the layoff. You didn’t need a crystal ball to see trouble coming at my company, but what could have been another lifeline was off the table without W2 employment. 

There was one other move that would help, and I took it: I transferred the balances of my credit cards to new cards with zero percent interest for 18 months. That would free up critical cash flow. 

In the end, I did need the 401(k) money. I wondered how much my early withdrawal had cost me in future earnings, so Cirksena helped me with the math. If I’d left that sum untouched, assuming an average of 7 percent a year over the 12 years until my official retirement age of 67, it would have compounded to $35,760. That’s money I’ll never see, and I can live with that. It’s not worth more than waving at my son across the street. 

Monopoly money

If I’m being honest, the very notion of retirement seems like a mirage to me and many of my fellow GenXers. First of all, I can’t imagine not working—I love what I do, and I’m lucky that getting older doesn’t limit my ability to do so. (Quite the opposite, arguably.) Even if I had sufficient retirement reserves, it wouldn’t feel remotely relaxing to gallivant around burning through cash, constantly wondering which would run out first—it or my life. 

My dad often jokes that he’s trying his darndest to spend every last penny of his retirement savings before he goes. Real funny. I don’t think any number of Costco runs will accomplish that. He turns 81 this year, and spends his time working on the house, playing full-court basketball, and poring over paper maps at the kitchen counter planning where he and my step-mother of 40-plus years can haul their giant camper with their giant new SUV.

It’s hard for me to fathom. The year my dad turned 57—the age I am now—he was forced to take mandatory retirement. Following a stint in the U.S. Air Force right out of college, he spent three decades working as a special agent in several Offices of the Inspector General, investigating fraud in federal programs. Though the job came with a pension, he also maxed out his own retirement accounts all those years. He’s a saver, born-and-bred, the son of a Kansas wheat farmer who survived the Great Depression. 

I got to wondering how big a nest egg he’d accumulated over his career, and thought about calling him to find out. Then I remembered I couldn’t reach him.

He’s in Tahiti, on vacation. 

At CNBC Select, we work with experts who have specialized knowledge and authority, grounded in relevant training and/or experience. For this story, we interviewed William Cirksena, SVP of retirement planning at MDRN Capital.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice to help them make informed financial decisions. Every personal finance article is based on rigorous reporting by our team of expert writers and editors. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties. We pride ourselves on our journalistic standards and ethics.

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