Assuming you are under 59.5, you will owe the federal government a 10% early withdrawal penalty. Depending on the state you live in, there may be a state imposed early withdrawal penalty as well. As far as the other taxes go, you will owe income taxes on the amount you withdraw. depending on your tax bracket and earned income it may not be as high as the 20% mentioned in the other answer. If you are taking money from a 403(b), there is a mandatory 20% withholding, but not on a 401k.

If you can afford it, I would suck up the $200/month for the payment and leave your retirement money alone. You will be better off in the long run by paying the $200/month instead of taking $7,000 to cover your loan and taxes.

Good luck.

It's a 10% penality on top of your tax rate (about 20%?). So if you took out $5000, you'd get about $3,500 to you.

To get $5000, you'd have to take out $7,142.86 to cover taxes, penalities.

They are required to withhold 20% if you take an early distribution and there is a 10% penalty. The entire amount will be reported on a 1099 to you and could slide some of your income to a higher marginal tax bracket.

Don't take it if there is any other way

You will have to pay income taxes on your 401k. The rate is whatever tax rate you are in. If you make enough money in 2007, then you would be taxed at a rate of 38%. Then you have to pay an additional 10% penalty on top of that. All of the money is due when you file your taxes.

If you are in the 25% tax bracket, then you will owe $1,250 in extra income taxes and an additional $500 in penalties. So it would cost you $1,750 to withdraw $5,000.

Are you required to take your money out of the 401k plan? Some plans will let you keep your money in the 401k plan after you leave the company. If this is the case you many be able to borrow against your 401k. You can take as long as 5 years to pay it back at a fixed interest rate (usually 7-10%). If you borrow $7,000 you will have the $5,000 you need and an extra $2,000 to make your loan payments for the next year (which hopefully will be enough time to carry you until you find another job).
I seriously doubt you will be able to do this, but you may as well call your 401k company (do not call your old HR department) and see if this is possible. But do whatever you can to not touch that money (or touch as little as possible). When you are 80 years old and in need of medical care, you will be very happy when you can afford to pay your bills.

well the loan will cost an additional 500 for the fee == taxes should not to bad since you are not working == but i think i would rather you take out only 1200 which set aside will give your 6 months to get a job and get back on your feet!!! you will on save on both fees and taxes!!!