Cash Out 401k

Cash Out 401k


Think twice before you do it.

A cash out 401k can cost you a lot of money now, and a lot of money down the road.

If you are leaving a job and have a 401k just hanging around, then you have 3 options:

  • Leave it in your former 401k plan.
  • Roll it to a new employer's 401k plan.
  • Cash out 401k and pay the penalties

Most financial experts will tell you the best option here is to rollover instead of doing a cash out 401k (Click here for an article about how to rollover your 401k instead of a cash out 401k). Although, everyone's situation is different and a cash out 401k may be right for you. Please consult your accountant before making a decision.

Cash Out 401k


During tough times, it may be tempting to cash out 401k money. But cashing out can be more expensive than even using credit cards to get by. Cash out 401k should almost always be a last resort. A cash out 401k will cost you 30-40pct tax now AND then a 10pct penalty (Ouch!). Let alone, what you do a cash out 401k could be possibly 5x-10x that amount in lost retirement money from one cash out 401k.

If you cash out 401k, you must pay federal and state tax. You'll also owe a 10 percent early withdrawal penalty but only if you are under 55 when you leave your job.

Let's say you are 40 and have $50,000 and you are going to cash out 401k. A withdrawal like that would guarantee you in the 27% federal tax bracket ($13,500 in taxes) and possibly higher. Then a 10% penalty ($5,000) from the cash out 401k and you will be left with around 60% of your cash out IRA ( Around $30,000). State income tax will possibly cost another $2,000-$3,000.

If you cash out 401k then you are restarting the clock on your retirement date. You will miss out on the growth your money has had to date and future growth.

Laid-off or no current income

If you are laid off, then you may feel forced to cash out 401k to pay the bills. It may be more cost-effective to attempt to borrow instead. Maybe a refinance or home-equity loan to get by until things improve instead of cash out 401k.

For those of you who are behind on their mortgage payments. There are firms out there that will help re-negogiate your terms for you with your bank. Here are a few of the firms I found, there are many others I am sure:

I think I read something once that your retirement accounts aren't counted against you when the banks determine your need for rewriting the terms on your mortgage. This way you can keep your retirement account and possibly stay in your home. Please consult one of the above links or an attorney before proceeding.

If you have to cash out 401k, a possible better route would be to roll it into an IRA and just take what is needed, to learn how to rollover, try this link.

Consider taking a loan against your retirement equity instead of cash out 401k.


If your 401k plan allows loans, you can borrow up to 50% of your account balance or $50,000, whichever is less instead of cash out 401k. You have a maximum of five years to repay the loan from yourself, unless you are borrowing for a first home, which allows a longer payback for the cash out 401k loan. This is possibly a much better option that just a cash out 401k. What happens if you don't repay your cash out 401k loan? Well, then you owe the penalties and taxes, just like if you were to just cash out 401k in the first place. Of course, before considering a cash out 401k loan, you should consult your accountant.

If you liked this article and would like to read other article I have written:

  • What are annuities?

    Very basic guide to describe annuities. For the beginner looking to learn the basics.

  • Compare Annuity Rates

    Compare the differences that each type of annuity can have on your retirement.

  • Compare Fixed Annuities

    Side-by-side comparison of two actual fixed annuity quotes and what exactly to look out for. This information could save you $1,000's.

  • 401k rules

    Article going over the basics of the 401k and the rules everyone needs to know.

  • Cheap Homeowners Insurance

    Find out the things to know to get the best price on homeowners insurance.


Cash out 401k Comments 96 comments

sporsfanX profile image

sporsfanX 9 years ago from US Author

Please leave your comments or suggestions about cashing out your 401k


Misha profile image

Misha 8 years ago from DC Area

Since I don't have one, there is nothing to cash out :)


Ralph Deeds profile image

Ralph Deeds 8 years ago

Good advice. Roll it over into a Vanguard IRA. They will handle it all for you without incurring a taxable event.


MarloByDesign profile image

MarloByDesign 8 years ago from United States

I agree with your points, and Ralph Deeds point too!

I always say, the only way I would cash out my 401K is if I was about to loose my house (could not pay the mortgage) - otherwise - NEVER.


sporsfanX profile image

sporsfanX 8 years ago from US Author

There are a few other reasons I would cash out of my 401k. They are very limited, though, due to the exceptions for making tax-free withdrawals (maybe i'll make a hub on this). One being, $10,000 towards down payment on 1st home. Another being for college. Another yet being for very high medical bills. I believe there are 10 major ones in all.

In general, pretty much never do it.


Freddy 8 years ago

I totally agree with your points. Saving for retirement is never easy, so it can be tempting to cash out...But it really isnt' a very good idea under any circumstances. You show the math of this very well.


johnr54 profile image

johnr54 8 years ago from Texas

One other way to get your money out would be SEPP withdrawals after you rollover into an IRA. These avoid the 10% penalty, but lock you into annual withdrawals until you are 59 1/2.


WizeTrade profile image

WizeTrade 8 years ago

I agree, but have this one thing to say. If you teach yourself to invest in stocks now, taking out your 401 K for investement purposes might not be a bad idea. Only use it for that though. Don't go and buy a car with the money. LOL. Everyone in the stock market is trying to dump stocks because they're cash strapped and fear volatility in the market. If you buy these people's stock, you'll get great prices and after this temporary wave of economic ressession, your stock will drastically boost in value.

Now if you're cash strapped yourself, you should stay away from taking out your 401 K. It all depends on your finances. If your a nebie investor and want to get into the market safely, I'd recommend wizetrade.


Ralph Deeds profile image

Ralph Deeds 8 years ago

You can roll your 401k over into an IRA AND invest the funds in individual stocks if you wish or in a no load, low cost index mutual fund. The latter is the best option for most people.


02SmithA profile image

02SmithA 8 years ago from Ohio

I agree that cashing out a 401k is not a decision to take lightly and too many people don't understand that!


eugie17 profile image

eugie17 8 years ago from online (everywhere)

Its too early to cash out, may be in future


ssj2690 8 years ago

My case is different. I have relocated outside USA and had earned income of $20K in year 2008. Have $11000 in IRA. Now my question is if I cash out my IRA will I still be paying huge taxes ? Shouldn't I get hefty tax refund because I have low income in 2008.

Please advice


Julie-Ann Amos profile image

Julie-Ann Amos 8 years ago from Gloucestershire, UK

Nice hub, have linked one of mine to it as the topic is relevant


sporsfanX profile image

sporsfanX 8 years ago from US Author

Sorry for the delay. To my knowledge, IRA withdrawals are not exempt from penalties for low-income. There is a clause for economic hardship though, for things like medical and mortgage payments. I don't know how you prove the economic hardship.


sheila 8 years ago

I am almost 56 years old and going through some difficult times. I am almost 3 months behind in mortgage payments and close to forclosure. I have 300k in equity. I also have a rental home which is fortuntally rented for almost the mortgage payments. The rental has been on the market for a while now and has decreased almost 100k since first putting on the market. I have 100K in my 401k but 2 years ago I took out a loan of 40k. I am considering cashing out most not all of my 401k in order to get my finances back on tract and start living again. Once everything is in order I can then start investing heavely.


sporsfanX profile image

sporsfanX 8 years ago from US Author

Cashing out your entire 401k could really cause a huge tax headache. Have you considered a home equity loan to get by? I have a rental property, too. We take a small loss on it every month, but we also can't sell it.


reagu profile image

reagu 7 years ago from Los Angeles

I agree that rolling over your 401K to your own individual IRA or your new company's 401K is always smarter than cashing out. Good advice here.


Going Broke 7 years ago

How much to you lose, before you cash out 35k,45k 50k, Gm stock fell 31% , they are worth now what the were in 1929, can't continue to loose $, this bull---- what these CEO's have done do this country, just another Enron.


sporsfanX profile image

sporsfanX 7 years ago from US Author

I think the current conditions have been hard on all of us. Hopefully, this turns out to be just like all the other drops and everything recovers (eventually!).

Good luck to everyone going through tough times right now.


nancydodds1 profile image

nancydodds1 7 years ago from Houston, Texas

Its agood advice about cash out 401K. Thanks for sharing valuable information.


helpme_2008 7 years ago

I'm 35. I had 58K in my 401K a month ago,,,now I have 38K and losing more everyday. My husband is thinking I should cash out now and put the cash in the bank in the event that I lose my job or something (due to the economy downturn). Initially, I thought, I'd cross that bridge when I come to it, but with my 401K dropping every day, there may be nothing to consider when and if that day comes. Is this a good idea?


King Midas 7 years ago

Let's see,many of the people that I have spoken to have lost 30% on their 401K's...on top of that,the Dems. are now discussing taking over 401K's(surprised?)and merging it with social security(think your 401K is hard to cash in now?,just wait).

Get YOUR MONEY out while you're able and buy tangibles-they will always be here,the dollar won't.


jeff 7 years ago

six months ago my 401k was $46,000, now it's $24,000 and I'm behind 2months in mortgage and have been unemployed since June. I also have medical cobra payments to make and my wife has been unemployed for over two years due to being disabled. hef disability has run out as has her medical plan's cobra option. she did not qualify for social security or any other disability. how does one roll over into an ira, and how much could i take out without killing myself with penalties and interest charges?


jeff 7 years ago

six months ago my 401k was $46,000, now it's $24,000 and I'm behind 2months in mortgage and have been unemployed since June. I also have medical cobra payments to make and my wife has been unemployed for over two years due to being disabled. hef disability has run out as has her medical plan's cobra option. she did not qualify for social security or any other disability. how does one roll over into an ira, and how much could i take out without killing myself with penalties and interest charges?


sporsfanX profile image

sporsfanX 7 years ago from US Author

There are exceptions for removing money from your 401k penalty-free for economic hardships, in certain cases. You can contact any major brokerage or bank for rolling over your IRA. It is pretty simple, just have to fill out one form.


Kunta 7 years ago

I have been looking afor a reason to do just that: cash out on my 401k. The Enron's and MCI and the many other scandals have caused me to loose faith in this market. I just started putting money in my 401k last year and my objective then was to put 10000 every year. I already had 20000 in my account back in August 2008. Now I find myself with 17500 and some change. I owe 340000 dollars on a house that is now worth 260000 at most. I'm thinking, I could invest in something in Africa and get a far better rate of return on my money than wait allt his time for some smart scroundrels to keep of fucking me inside out.

My plan?

Get the 12000 and buy a truck [2004 Nissan Frontier] for 6000

Send the truck in Africa for another 2000

Put it to work and expect a rate of return of 20 dollars everyday, after maintenance and operations fees.

20 dollars multiplied by 300 days= 6000 dollars a year. Lets say 5000 dollars every year in profits. I'm thinking I would be far better off... Just a though.

Note that these figures are pretty conservative, given that a truck in the third world wil guaranteed to work everyday for the next 20 years.

Why shouldn't I cash out on the 401 k thing?


bgamall profile image

bgamall 7 years ago from Las Vegas, Nevada

Yeah Sportsfanx. Who are you to say that money is safer now in a 401k than it would be under the mattress. I would say that in normal times your advice is very correct, but George Bush and the housing ponzi scheme changed the rules. No one has ever really tested FDIC or brokerage insurance plans in a depression. That is the great unknown right now. No one knows what will happen to our financial system.


Willy 7 years ago

Good God!

If I had cashed out when I left my job last summer, I would have lost less money than I have since and I would have the cash!

I am tempted to hold on but if the market goes to 5000 then I will have blown my opportunity again!

These are truly trying times.


retirementhelp profile image

retirementhelp 7 years ago

Well written with good advice. Cashing out your retirement plan should be your last option.


bgpappa profile image

bgpappa 7 years ago from Sacramento, California

Good Hub. I took a loan out against mine. All worked out real nice. Good Interest Rate as well, better than what the market was offering. Make payments out of my check that are very reasonable.

Hard thing to do but sometimes you have too. Of course, I have lost 30% of its value recently, But, the loan is a better option than cashing out. Its your money, you should be able to access it without paying outrageous fees.


sporsfanX profile image

sporsfanX 7 years ago from US Author

I know many are quite upset about the situation they are in with retirement. However, these situations have happened before. Having your money in a retirement account doesn't mean it has to be invested in the stocks. There are other options out there.

If you look historically at the major stock indexes, they have all achieved major upswings after things reached their bottom. However, none of us will be able to say for sure where the bottom is going to be.

I would think keeping your money "under a mattress" right now could have horrible effects since our benevolent government feels they can print their way out of this mess. All that money they made appear will catch up with us at some point with very high inflation rates. Investing in stocks is generally considered one of the best ways to fight inflation.

Everyone's situation is a bit different, though. What's right for me is not necessarily what's right for everyone else.

I tried my best not to give advice, but to rather show the consequences of withdrawing your retirement money. However, if the bills have to get paid, the bills have to get paid.


muddcat 7 years ago

I have 8000 dollars in my 401k and it is dropping every day several of my investments are gone and others dont look good and they dont offer any options that arent losing money. should i take my little bit and run before i have none?


MarloByDesign profile image

MarloByDesign 7 years ago from United States

My 401K is so low right now, I hope the market rebounds.


iMindMap 7 years ago

Nice hub. Some knowledge to know.


jdnyc profile image

jdnyc 7 years ago from California

Every 401k projection is based on 8-10% annual return, and when the value of my current 401k has dropped 50% in six months, doesn't that have an impact on the decision to cash out?  We may not be seeing 8-10% returns for several years....  any thoughts?


sporsfanX profile image

sporsfanX 7 years ago from US Author

There was a rebound this week in the market. However, some "Experts" claim it could be a short-term trend before things could go back down again.

Hopefully things can stay positive from here.


Jim Bauer 7 years ago

Good, sound advice. Too many people tend to hit the "panic" button and fail to see the greater dynamic in play. Times seem bad right now, and they are certainly tough. But this economy, and the market conditions that have come from that as a result, is also a cyclical event. No one could see the brighter days ahead after the crash of 1929, or beyond the Great Depression. Yet here we are. The markets are lower than they were 5 years ago, but considerably higher than they were then. So it's not all bad, and the term between then and the more prosperous years just prior to this recent pullback was certainly enough time to make quite a lot of money. If you do not have a need to cash out a 401k now, or in the next 5 years, you'd be wise to leave it alone. The economy is going to improve. The markets are going to go higher. It's not going to happen tomorrow. But it is, indeed, going to happen. The next up-cycle is going to be a massive one.


Alien, The 8th Passenger 7 years ago

I´ve got deported, so I wont come back whithin the next 10 years or so... Any accounting can cash it out for me, right?


Erick Smart 7 years ago

Cashing out your 401k is always a bad idea and you should try and avoid it all costs.


jasonstevens profile image

jasonstevens 7 years ago from California, United States

Am I correct that you can withdraw your deposits in a Roth IRA without penalties?


Free Online Exams 7 years ago

Cash out a large amount makes reliable for further life


ontheway profile image

ontheway 7 years ago

Cash Out 401k

it Was very well written, I support you, welcome to my hub


sporsfanX profile image

sporsfanX 7 years ago from US Author

You can withdraw your contributions from your roth IRA whenever you want, penalty free (since you were already taxed on those contributions). After that, you must meet certain criteria before being able to withdraw penalty free.

There are many reasons you can cash out, though.

If your regular ira/401k suffered, it may be worth a look at converting it into a roth ira.


sporsfanX profile image

sporsfanX 7 years ago from US Author

I did a quick write-up for people looking to withdraw out of their roth ira:

http://hubpages.com/money/Roth-IRA-Withdraw-Rules


Robert 7 years ago

My 401k just keeps losing money and now I no longer have my job, therefore nothing going into the 401k. I think that I should take my losses and just cash it out. It seems that I'm going to lose all of the money anyway with the way my funds are depleting on their own. Can someone give some advice?


snicker4 7 years ago

With the world being in the shape it is today one can't help but live day to day and not worry so much about the future. Who"s to say that saving a 401k at this time would even be a benefit when you are no longer able to work.


steveonline profile image

steveonline 7 years ago from Houston, Texas

Unless I was going to foreclose on my home or I could not afford to provide food and shelter for my family, I would not cash out my 401K. There are way too many dangerous aspects to this. So many people don't realize the repercussions and end up losing a lot of their money.


John. 7 years ago

great sharing , good advice. thank you


thegooch 7 years ago

yeah, if the IRS has seized all of you liquid capital( including emergency funds), you've lost your job, an your looking at losing you home and car...plus needing food, thinking about 30yrs down the road no longer applies. If you are dead within a year, retirement savings are not going to do you any good. if you have income or at least means to weather the financial glitch you are in, sure, keep your investments.

Also, if your 401k is losing money with no chance of a rebound, getting some money out is better than nothing. I know people whose 401k when from a value of tens of thousands of dollars to like 50 dollars during the dotcom bust. are you going to tell them cashing out and and getting 30 thousand instead of like 30 dollars would not be smart move?


Jonty 7 years ago

Just in one word ..... Great


Joe 7 years ago

So what if you lose 30%? I lost 50% when the markets tanked in October of 2008...it went right back into the market. I had $90,000 in there that was matched by my employer for 10 years up to 6%, and then the recession hit. I should have taken the $90,000 out, paid the penalty plus the loss percent and banked $53,000 in CASH. It's all paper anyway, and the way this stuff is going how do I know it will be there when I retire? What if they start taxing it as well? If your company does a match, a lot of the money is free anyway. Some people are better off using it now.


Diane 7 years ago

I lost my job and and haven't been able to find another. I'll be 55 in about 4 months and we (my husband and I) are sinking fast. We are thinking of cashing in my retirement fund to pay off our home. I hate the thought of losing my home. I only have about $31,000 in there. I want to know if this is a sound thing to do or we try and find another solution.


sporsfanX profile image

sporsfanX 7 years ago from US Author

Not everyone's situation will be the same.

Keep in mind that if you lost your job, you can make certain withdrawals penalty-free. Examples would be for health insurance and making your house payment.

If you need the money, you need the money.

However, if you withdraw all of the money to pay off your home, you would most likely still be liable for penalties. Yet, if you use the money to keep paying your monthly payment, it may be able to be taken out without penalties.

Please consult a tax attorney, accountant or someone you trust who is knowledgeable on the subject.


alan 6 years ago

Bullshit. Cash out and invest in paying off your mortgage and never invest in stocks again. There are too many government sponsored and protected cheaters waiting for you to be stupid and give them your money. This increase in the dow jones is nothing but a big set up for the next harvesting of your money. Don't fall for it. Get out. I am about to get out and pay my mortgage off. Your only goal is to have a place to live that you don't owe money on. If you have that your in very good postion. These fat cats are not going to let you make money in these stocks. Please don't keep falling for this crap. You will be better off putting your money in a savings account and then buying rental property. You won't be rich when you get old but you won't be homeless. Get out while the market is up.


Deccan Chargers 6 years ago

Very wonderful written hub ......


giimasterone 6 years ago

thanks good topic


Just a Dude 6 years ago

You know...I always hear all this doom and gloom about how much of your "future" you'll lose...how much you'll hurt your retirement...how much you'll regret it... Yada yada yada...

You know what though...every situation is different. Let's say you're going to use the funds left after the tax bite and you'll substantially reduce your debt, cut your monthly bills, elevate your family's residential location, provide your children with a better education through a relocation to a better school district, or more... You know what guys and gals...it might not be that bad of an idea after all. I would gladly trade working another 10 to 15 years (instead of retiring ~55-60 to working until 65-70) for peace of mind and a better life for me and my family today. Heck...you don't even know if you'll have the health to enjoy all that "savings" one day anyway. But...you might be able to almost guarantee your family and yourself a better today. It's not always fun or palatable...but sometimes cashing out the 401k isn't always that "stupid".


UP IN THE AIR 6 years ago

My husband took his 401k out because he lost his job and that was the only salvation...The President should have passed a law withholding the taxes, especially at this day and age with the economy the way it is.. This is the only sanity for people now a days. The taxes are not going to be fun this year, but in the long run it paid off because all my bills are paid and at least I have some peace of mind.


kevin  6 years ago

401 k is a joke I will never get in one again.

All the money you put into an 401k will be taxed at the tax rate at the time you take it out. who knows what that rate will be when you retire.Your best bet is to not let the government know what you have.keep it in a safe place other than in a bank. look at what just happened with the banks and wallstreet. they gave themselfs a big bonus on our money.and we lost a lot. they are the ones that tell us to invest and save so they can live high on the hog with our money.


em 6 years ago

I agree with Alan. My wife has been laid off. I don't make enough to maintain our house. Selling is not an option as we have about $5000-10000 in repairs to allow us to sell the house. Selling a house now is almost impossible.

With her unemployment we're treading water. Without, I'm withdrawing from the 401 anyways a few hundred a month.

We've paid our credit cards almost completely off through my dilligence over the past six months( less than $500.00 ).

We also have a 2 year old and my wife is staying home with her. I'm working in a new job with a pension. I've thought of taking my 401K and paying off our house. From what I can tell, even with penalties, I'll save approx. 70,000 over the lifetime of the load. Furthermore, I can immediately take pressure off my family and still put away $300-500 a month in an IRA. And like Alan, I want a place clear and free. Sure I can't get away from paying taxes; however, I want banks out of my life...

Lastly, I've been hearing that stupid story about 8% compounding for a long time. I consistenly put in 6% and when I left a company in 2005, I had $125,000. Lucky for me I left that investment in the most stable fund possible making little or nothing. Then 2008-2009 happened. I did not lose like a lot of others, but I'm back at $129000. I don't feel like risky what little I have to try to get to 8%. I think this 8% figure is the smoke the guys blow up our butts so we won't take our money out and do as Alan say. Pay off our mortgages ( no more interest ka-ching for you Mr. Banker!!! )


D Dean 6 years ago

I agree with em:

Lastly, I've been hearing that stupid story about 8% compounding for a long time... Then 2008-2009 happened. I think this 8% figure is the smoke the guys blow up our butts so we won't take our money out...

Try running that graph with the actual federal reserve interest rates (just to keep things interesting and really exercise you math skills) and you will see some really depressing figures.


dAVEYB 6 years ago

I agree....don't pay down debt or move your remaining savings into a stable money before the dollar collapse...TAKE ON MORE DEBT! Theres a reason why the government makes it very unappealing to want to withdraw your money from the ponzi scheme..ahem, sorry..the market. We wouldn't want everyone to come to their senses at the same time would we? How would our top heavy population of baby boomers cash out and stick the younger generations with all the worthless paper? Thank god I listened to people like Ron Paul, Peter Schiff and Mish a few years ago. The last act of any government is to loot the public. Stop listening to these shills and read up on the history of fiat money throughout history.


sporsfanX profile image

sporsfanX 6 years ago from US Author

Ron Paul is one amazing man, a true American.

I'm guessing the USD has some ways to go before collapse if you look at historical trends with a country thats debt increases too quickly.

I'm personally buying silver to combat the eventual devaluation of the USD. I think it won't happen for at least another 5 years, though.

I disagree with taking on more debt, though. Live within your means and plan accordingly for the possible hyperinflation scenario. Precious metals have the ability to perform well if there is a currency crisis.


kea profile image

kea 6 years ago

Hi SporsfanX! I just happened to do a search for "cash out 401k" and noticed you were the first hit! Thanks for the advice. I'm on hubpages too and have been doing some SEO recently on my hubs, but it was cool to see you pop up #1 in google! I guess this hub is optimized :) Cheers.


401k 6 years ago

In a case where you've lost your job and would like to cash out your 401k and pay off your house, yes it makes sense in a way because you save hundreds of thousands of dollars in interest, depending on the value of your home. But there are disadvantages, here's what you should consider:

For example, if you have $15,000 in your 401(k) and decide to take a lump-sum distribution after you leave your job, you'll lose the benefits of tax deferral and the potential opportunity for investment gains worth tens of thousands of dollars. Assuming an eight percent annual return, that same $15,000 could reach nearly $70,000 in just 20 years.

Additionally, taking a distribution can mean you'll get socked with a 10 percent early-withdrawal penalty as well as federal and state income taxes. If you're in the 27.5 percent tax bracket, federal taxes and penalties will add up to a large bite-$5,400 before state taxes-of your $15,000 distribution.

To avoid such losses, consider rolling your 401(k) to an Individual Retirement Account (IRA). Doing so will likely give you increased investment options and more control over your money. With an IRA, you can invest your money a number of different ways, including in stocks, bonds, mutual funds and certificates of deposit. As with a 401(k), your assets will still grow tax-deferred and, as your investments grow, you'll still enjoy the benefits of compounding growth.


Jessica 6 years ago

Great and clear advices on here. I understand keeping 401K's especially when there is a large balance. I no longer work and have only $5K in my plan, I no longer want to deal with debts and just want to pay it all off especially with high interest rates on credit cards lately. I have calculated and will be loosing around $1600. Do you think it's wise for me to just cash my 401K and pay all debts or keep the cards and just calculate how much interest the cards will charge me overtime and match my figures against the $1600? I hope this question makes sense. Thank you


sporsfanX profile image

sporsfanX 6 years ago from US Author

Taking out the $5k will add $5k on to your income for this year. Plus, possibly an additional $500 "tax/penalty".

I have always considered my retirement account my absolute last resort for liquidity. But, sometimes you got to do it.

Keep in mind, you can take out loans from your 401k in certain situations. That also can apply to IRA's. I know with my IRA I can take out a 60 day loan.


ricky develo profile image

ricky develo 6 years ago from Orange County, CA

Great advice - thanks for the information.


kent smith 6 years ago

Is there someone,out there that can tell me the exact, amount of money, left in my 401-k.and how I can cash out.If so,email me at k.smith@netzero.com.


sporsfanX profile image

sporsfanX 6 years ago from US Author

Kent, get in touch with the 401k plan administrator of the company you have your 401k with. They should be able to provide you with a statement of your current account. If you don't work there anymore, then call your HR department and ask them to assist you.


kevin 6 years ago

thank god for george bush and the rest of the republicans for takining us inyo two wars its mot a won der why americans are broke !


kevin 6 years ago

never ever join a 401k! if you dont live untill your 65 then you will have saved moneyfor someone else.it is better to take out a life insurance policy on one or both of your parrents ... mot that you want to see eiyher of them die ,,, but its a fact ... were all going to die someday ......... you will get a huge plan.... more than a 401k willever pay out another thing is ... everyone should be willing to put a tiny bit more towar d sociolsecurity so it willl be ther when we turn 65 and keep it goig through all generations and everyone will have help when they turn65 // thank god for the dems who started that without any help from the repupulicans !


Doc J 6 years ago

If your 401k is losing money, you can stop the bleeding today. Roll your 401k into a self directed IRA backed by precious metals. Gold and silver have shown gains of 300% for the past 7 -10 years. Historically speaking now is the time to invest in a safe and reliable commodity like Gold or Silver. If you need help call me. (888) 361-6809 ext 1500.

Don't wait!! You may wake up tomorrow and ALL of your hard earned savings WILL BE GONE.

Call today!! It’s a very easy process that puts YOU in control of your money. (888) 361-6809 ext 1500.

Dr. Jones

Account Executive

United States Metals Corp.

www.unitedstatesmetals.com

(888) 361-6809 ext 1500


erik 6 years ago

a) someone above said to never do a 401(k). That is awful advice. If your company will match your 401(k) contribution, you want to make sure you take full advantage of that. If they will match up to 4%, then contribute 4%. That is free money. Even if you pull it out later and take the 10% penalty, it's still a gain of 80% of your initial contribution.

For example, you contribute $100. Your work matches $100. You pull the $200 out and pay the 10% penalty. You get $180 from it. That's $80 more than your initial contribution.

b) Correct me if I'm wrong, but you pay taxes on it eventually, whether you take the money now or later. The only benefit to waiting until retirement is that you will theoretically be in a lower tax bracket so you will be paying less in taxes. That's not a huge benefit, and it makes assumptions about the future. For all I know, tax rates will go up and I'll be paying more in the future if I defer it. The huge benefit of deferring it and maybe being in a 25% tax bracket instead of a 33% tax bracket is a pretty weak argument.

c) The 10% penalty isn't really that steep. If I have $30k in my 401(k), I'm happy to pay $3k in order to pull it out and have control over it instead of letting the 401(k) decide where to invest my money. Most of those investments are high risk anyway. Also, since half of my $30k was from my employer from matching my contribution, I'm not really losing any of my own money.

d) Most retirement projections assume something like an 8% yearly gain on your retirement account. If anyone has been paying attention, you'd know you have a better shot of losing half your money over the next 10 years than getting an 8% return.

With all of that in mind, I don't see a lot of reasons to maintain my 401(k). Granted, I'm young and not too concerned about where I will be financially in 30 years. I would much rather put my money to better use now under my own control.


sporsfanX profile image

sporsfanX 6 years ago from US Author

Unfortunately, Self directed IRAs have several shortfalls. Make sure anyone considering going for a self directed IRA does a lot of research. For instance, you can own gold and silver(US eagles only, afaik) in your IRA but a custodian must have possession of the metal(at least, from what I have read).

The only real way to have safety from the financial system is to physically have precious metals. Anything else is just a paper promise to deliver the goods.


michaelmitchell 6 years ago

tack my 401k from empoyler


sporsfanX profile image

sporsfanX 6 years ago from US Author

I need to correct myself regarding self directed IRAs. Apparently you can hold either very high purity gold(.995 pure or higher) OR gold eagles(which are 90% pure). So it appears gold eagles are the exception to needing pure gold in your self directed IRA. If anyone else has any experience with a self directed IRA, feel free to post here about it.


mandatory retirement 6 years ago

Being 64 and about to retire I can tell you from my 64 year point of view that's it better to have something than nothing. Living on just social security is work.


John 6 years ago

Here's my case: I'm 40, married, have $50k in an IRA, been out of work this year and live in Florida. If I take out $20k from my IRA this year my total tax would be $2130, just 10.7%! That's because, after deductions, my federal AGI is just $1300, and at 10% tax rate I only pay $130 tax, plus the 10% penalty. Of course Florida is great, no state tax! I can't imagine a better time to take money from my IRA.


Daniel 6 years ago

I am planning on starting a small business in the spring of 2011. The business is a no brainer and will be successful from the start. How ever i need to cash in 401k of 40k to start. Any advice? I am 35 years old.


PK 5 years ago

If I could just cash out my 401k and take the tax/penalty hit, I would do it. Tax rates are going to rise, and if you've got a $1 million in your account, youll end up paying $750,000 of it in taxes. Also, the govt is planning to confiscate private retirement acocunts to fund already-broke public-sector pension plans, so if you can get your money out, do it now.


Jackieson 5 years ago

Is there a way to withdraw your entire 401K without leaving your job?

With the recent chatter from the regime aiming at a retirement account takeover I’m considering ending my 401K before they take control of what I have earned; so I don’t make any silly decisions.

This is not a debt driven decision, I just don’t trust Uncle BO.


Heather 5 years ago

Just how does one refinance without a job? Do fairies add to your income, helping you qualify? Or do you have a dying Auntie co-sign?


sporsfanX profile image

sporsfanX 5 years ago from US Author

Can you make withdrawals/rollovers from your 401k at your current employer, yes and no. Each plan can be different and you have to find out what the exceptions are, probably with your HR department.

Generally, it isn't that easy though.


John 5 years ago

Funny to look back on these 2 year old posts and see how many of you were looking at bailing out at the bottom of the market. I hope you didn't. My 401K had dropped to 46K two years ago, and it's at $99K today, despite the fact that I have not contributed a penny during that time.

I think it's safe to say that anyone who cashed out except to save their home or for other extreme hardship is really regretting their decision. Turns out the money was safer in the stock market than the mattress, you must admit.


Jason 5 years ago

That's only because of the the Fed and QE. When the music stops you will lose your ass. If economy could stand on its own two feet there would be no need fore QE1, 2, 3.....it is all smoke and mirrors. Keep telling yourself everything is fine.


Ford 5 years ago

I am 63 and getting laid off in one week. I have a small balance in my 401k - $15,000. Am I to undrrstand that if I cashout, I will pay tax on the money I get as income? because of my age, I won't have the early withdrawal penalty correct? I put the money in here for debt payoff at retirement, which is now due to failing health. I will receive an annuity from my employee stock option and social security plus my wife's pension to live on.


Chris 5 years ago

Im 42 years old. Ive thought about cashing in my 401k of $185,000 and paying off my house which I owe $94,000 on and being debt free. In the mean time while Im still working I have the capability to save $35,000 a year cash. Within five years I could have all that 401k money back again, house paid off, and less stress. I think ill wait in the event I loose my job...then it's a no brainer! I'll Cash out. Not to mention the goverment wouldnt be able to deny me social security when the time comes cause I have "sumplemental income"....like 401k. IRA. Pensions. The day is coming folks when social security will be broke and they will issue it on a need basis and if you have a huge 401k you wont need it hence you wont get it. Save your cash money, fly under the radar, collect social security which some of us have contributed to our whole lives and deserve to get it back!!! Do your math people and be careful of the NORM! As far as being afraid of loosing your money in the stock market....be involved with the market, read and educate yourselves. If you have access to a self guided brokerage account or PCRA (Personal Choice Retirement Plan) within your 401k accounts...do it. If you get spooked, sell and the money stays in cash...yes cash $$. Not some mutual fund that trys to equal dollar for dollar but real cash. You can always jump back in later when you think the time is right. Just a thought, it's worked for me. Good luck everybody! Life is harder than I thought it would be..


ACG 5 years ago

I do not believe is the religion of 401K. No alternative was every provided at the time and that alone should have been a red flag to me had I possessed today's wisdom one decade ago. I want no part of the 401K and all other aspects government related. To be "PERMITTED" an exit out this scam regardless of the boogy man "hit" tactic threatened against natural people I found not to be a loss but to be a blessing. Rare fee things is this fascist land are you actually allowed to exit.

See me run for out that door.


Alexander Mark profile image

Alexander Mark 4 years ago from beautiful, rainy, green Portland, Oregon

If a 401k works like it's supposed to, then it's a great deal. But I have learned to mistrust any organization that takes any kind of control of your resources.

I decided to stop contributing to my 401k plan and wanted to pull it out. I was told I couldn't until I left my job because of the way my company set it up. Later I left my job and then they told me they couldn't cash it out until the following year because they had to do some kind of year-end paperwork. And once again I've been told no, this time it was because now another management company is involved and they will send me the paperwork so I can apply for a withdrawal- which naturally hasn't arrived yet. So my only option at this point is get a lawyer or roll it into an IRA and then withdraw, and that seems the more cost effective thing to do anyway.

I'm glad I read this, not only is the information on 401k investment and withdrawal very easy to understand, you also showed other options.

As for me, I would rather build my own retirement!


No interest 4 years ago

I have no interest in retiring in this country. I don't plan to be here in 5 years. To me, this is good reason to cash out the 401K and use the money now.


steve01 4 years ago

Get out of the 401k scam!!!! You're better off just keeping a simple bank account. Save your money the old fashioned way.. I've seen people lose half of their 401k right before retirement and some others have died before they can cash out. Only the good die young so quit while you're ahead!!!!


Justneedinghelo 4 years ago

Hello, I have had 401k plans at my previous jobs...but never knew how to manage them. I tried to leaarn and ask qusetions but it was all Greek to me. Does anyone know a phone number or website I can go to, to find out if I have these plans still or not? Thank you

If you wouldnt mind, email me at glfear@gmail.com thanks


Fleelswed 3 years ago

My spouse and i accustomed to receive high on existence nevertheless lately I have established some sort of amount of resistance.


Mylindaminka 3 years ago

Сзади красуется стандартная надпись ANDROID, а также камера со вспышкой, и это в принципе, все. Толщина телефона составляет примерно 1 см, что согласитесь не мало. Но сам корпус собран добротно – нет ни щелей, ни люфтов.


gepeTooRs 4 months ago

Fantastic article. Looking forward for more posts like this.

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