Comments on: When Can I Take Money Out of My 401k?

By: Trey

Trey — Sat, 06 Aug 2011 19:50:49 +0000

My company has recently been sold. I have med bills in collections but not the required 7.5% of income for hardship. Cant take out a loan because credit is too bad. 401k doesnt allow loans. Can i use the company sale as reason for early cash out of my 401k

By: Cory Workman

Cory Workman — Tue, 24 May 2011 20:14:20 +0000

I hate the “you’ll have to pay taxes” argument.

You are going to have to pay taxes on it no matter what. And tax rates are likely to be much higher in the future.

IMO.. most people would benefit greatly by paying the taxes now and converting all that money into a ROTH.

Obviously, just spending it is a bad idea. But there are certainly much better places to put that money.

IMO.. if you don’t get a company match, I would put your investment dollars elsewhere as long as you are disciplined enough to contribute each month without it being jacked out of your check.

By: Kaitlyn

Kaitlyn — Tue, 29 Mar 2011 20:52:20 +0000

Hello! I quit my job and have not gotten another one (by choice, but I am way too young to retire). I have heard that since I am not going to be taking my 401k earnings and putting them into a new account (with a different employer) they will mail me what I had earned (which was not a whole lot, again I’m very young). How long does it take to get that check, and is there anything I need to do in the meantime?

By: disbooo

disbooo — Thu, 03 Mar 2011 03:05:25 +0000

I’ve been fired for “disability”, which is illegal as far as I can tell. As far as I can tell, I’m barred from any viable employment because of these illicit actions. I’m ineligible for SSDI. I’m getting a tiny “benefit” from my previous employer. I have a house, which I don’t want to lose, as I haven’t found a way to survive without it.

I have a small 457K and a tiny Roth. I’m told (by the retirement agency) that I will have to pay back all of the “benefits” that I’ve received so far, if I receive any income. I’ve looking into buying a business with the money, but I’m told the expenses are prohibitive and would easily overwhelm any benefits. I’m broke, hungry and cold.

Is it possible to get any type of benefit from my home or my retirement accounts?

By: Mary K.

Mary K. — Sat, 29 Jan 2011 00:07:58 +0000

I’m 45 and I’m not going to live to see 59 1/2. Sure, that money will go to my heirs when I die, but I barely scrape by and would like to tap into my 401K so I can buy things like decent food and pay medical bills. It’s with Vanguard, and it’s from a job I gave up 11 years ago to raise my children.

By: Pinkpank

Pinkpank — Fri, 10 Sep 2010 22:30:22 +0000

Flavius, you hit the nail right on it’s head!

By: Flavius Maximus

Flavius Maximus — Thu, 29 Jul 2010 02:30:00 +0000

Over the years I have come to disagree with conventional wisdom on taking money out of a 401k plan and on the value of the 401k in general. This article has what I consider to be a common flaw in its accounting. When removing money from a 401k that has been put in as pre-tax dollars, taxes will be paid, this is true. But this is irrelevant. If you use non-401k money to pay of the same debt, you must pay the same taxes on that money as well. So the tax issue is meaningless. Thus the real issue is the 10% penalty paid. Consider however that most Credit Cards are taking well over 10% and you can see that it is in fact a good idea to pay off CC debt with 401k money.

As I see them, there are really only two benefits to a 401k. First is an employer matching. Second is it is a form of forced saving. Most people I know cannot save unless they never see the money. But there are better ways to force yourself to save and any company match is only a one time thing and even that is not yours till you have worked for typically five years of more.

But the article does hit the real problem on the head. With 150K/year income, there is little reason for this couple to be in debt unless there is no planning put into spending and saving. This is a common problem for people. This article offers the best advice in the end which is: create a plan to save and pay off the debt, then work to the plan.

Thus the real risk to using 401k money to pay off Credit Card debt is not that you will be paying 10% on your money, because some simple math can be used to tell you if your current rates make the deal a good one of a bad one. The real risk is that after you have paid off the debt, the consumer will not change their spending and saving habits which means in a year of two they will be back to having the same debt, but no more 401k savings.

Hail Flavius!

By: Joyce

Joyce — Fri, 09 Apr 2010 14:40:33 +0000

I am 62 and would like to take money out of my 401K to pay off all my credit cards. This would also free me up to be able to pay an additional amount to my mortgage so that is is paid off in 3 1/2 years. This appears to me to be the best way to be debt free and house all paid for when I retire. Can you offer any advice? Is there a better way to do this?
Thanks, Joyce.

By: David R. Lampsen

David R. Lampsen — Sat, 12 Dec 2009 14:03:41 +0000

You should be able to take money out. The real question is whether or not you want to finance those legal fees by doing so. Talk with the folks running the 401k and your accountant. Seek out any superior alternatives, too. Whether it’s in a mattress or a 401k, it’s your money. It’s just a matter of managing it the right way. Best of luck on the adoption!

DRL

By: Mary

Mary — Wed, 21 Oct 2009 19:06:21 +0000

My husband and I are adopting our granddaughter – there are serious legal fees. Can I get my money out to help with this?