I am changing jobs and want to get rid of some big bills.
2006-08-20 05:06:20 · 8 answers · asked by joy r 1 in Business & Finance ➔ Personal Finance
You will have to pay a penalty and taxes on it.
2006-08-20 05:16:06 · answer #1 · answered by Bill 6 · 0⤊ 0⤋
Penalties, penalties and more penalties. If you want 8,000, then you must withdraw more than that amount because you are looking at a tax penalty of at least 20%. You may also have the option to borrow from your 401k, but this also incurs costs in terms of interest on the loan, and again taxes. I recommend staying with the old plan if possible, or rolling over into the new employer's plan. Keep this money for retirement, you will be glad of it one day. Then pay off your bills the old-fashioned way, by working and paying all you can until the bills are gone.
2006-08-20 20:39:59 · answer #2 · answered by Freddie 3 · 0⤊ 0⤋
Assiming you are in the 28% federal tax bracket and your state tax is 3%, with the 10% pre-withdrawal penalty, the results are:
8000 - 2240 - 240 - 800 = $4720
Since you are changing jobs, you cannot borrow against your 401k. Maybe your new job comes with an increase in pay.
2006-08-23 14:54:35 · answer #3 · answered by Steve R 6 · 0⤊ 0⤋
Unless you are 59 1/2 or older, the penalties are great, like 20 or better. Plus you'll pay taxes on the full amount. I just took $3600 out of mine and the taxes were $800. I didn't have the penalty becasue I am 60. Check with your financial advisor.
2006-08-20 12:15:55 · answer #4 · answered by Classy Granny 7 · 0⤊ 0⤋
You'll lose a minimum of 10% of it in penalties for taking it out, plus income tax will be taken out of it. Also, check your new company's policy, some 401k policies don't allow you to put money back into for a period of time once you take some out.
2006-08-20 12:18:56 · answer #5 · answered by rocknrobin21 4 · 0⤊ 0⤋
1. You have to pay taxes on it. Either now, or when you do your taxes.
2. You probably have to pay a penalty (could be up to 20%)
Your best bet is borrowing against it, paying off your bills, then paying yourself back with interest (your own interest).
I did this when I bought my house.
2006-08-20 12:12:22 · answer #6 · answered by Judge Smails 3 · 0⤊ 0⤋
You'll get taxed for it. Maybe a penalty, too. Better to borrow against it.
2006-08-20 12:13:06 · answer #7 · answered by Anonymous · 0⤊ 0⤋
Disastrous.
Unless it is to pay for your first home purchase, which I would wholeheartedly endorse.
2006-08-21 00:28:29 · answer #8 · answered by DaMan 5 · 0⤊ 0⤋