Should I cash out my 401k to go from a break even on my bills to getting ahead?

Answer 1

talk to the people who are in charge of your 401k and ask about getting a loan against the money. i can take a loan on mine as long as it's above a certain amount.

Answer 2

Cashing out a 401K is one of the worst financial moves an individual can make. First, the government gets 10% as a penalty. Second, the total of the 401K is added to that years income and you pay income taxes on what you earned on W-2's PLUS the total 401K amount, before the 10% penalty. The bottom line, most people are losing at minimum 25% of what's in their 401K when cashing out.

Imagine if ATM machines charged you $25 when you made a $100 withdrawal. Same difference.

Answer 3

DO NOT, I REPEAT, DO NOT CASH OUT YOUR 401K!!

Unless, of course, your parents have agreed to support you for the rest of your life.

There is no such thing as breaking even on your bills to get ahead, because bills are never-ending.

I recommend that you thoroughly research how much you will be paying in tax penalties for early withdrawal on your 401K. You will be surprisingly shocked!
The IRS does this for one reason only; and that is to help you, help yourself. Their logic is that if they penalize you enough, by charging outrageous taxes, it will prevent you from cashing out your 401K.

I learned this lesson the hard way, a couple of years ago, when I was unemployed for an extended period of time.
I cashed out my 401K, which was approx. $15,000, to help pay my bills. The money ran out really quick, but the bills kept coming.

Most people would think that this would only affect you financially, but I am hear to tell you that there is also a psychological affect on you that is worse.

I was so proud of how much money I saved, in such a short amount of time, while making small contributions. I was able to do this by making smart decisions to diversify my investments in several types of funds, and then leave the money alone.

I feel like a failure now for making such a rash decision, without taking the time to understand the impact that it would have on my financial situation later on down the road.

So please, learn from my mistake, and do it right the first time. Leave your money alone; it will be the best desicion you will ever make.

But if you are like me, don't worry or lose hope about the future; because it is never too late to start saving for your retirement.

Check out the following website to help you, help yourself:
http://www.mymoney.gov/

Answer 4

No. I would advise against such withdrawal unless you are so far in debt that tapping into the 401(K) is the only option you have.

Unless you are 59 1/2 or older you will pay income tax on all of the money you withdraw from the 401(K). It was contributed "tax free" and upon withdrawal Uncle Sam wants his cut.

Finally, be aware that you are mortgaging the furture to pay for the present.

Write down where you spend your money each day for a month. You will be surprised where it goes. Then, set up a budget of "got to have" as first priority, "need to have" as second and "like to have" as third. Once you have paid the "got to haves" you can decide what to do with the leftover "discretionary funds".

Hope this helps.

Answer 5

Probably, not a good idea. First off, your 401(k) is for your retirement, not your day to day living. Secondly, you'll end up with some sizable tax bills, to the tune of 20% of what you take out. If you take a loan out from your 401(k) and then pay it back (with interest), you'll avoid the interest, but you're still hurting yourself in the long run.

What you need to do is cut out some expenses and live within your means.

Answer 6

Hey! Who has your 401k? Hartford? Some companies will allow you to borrow against your 401k ithout penalty. If you can, most of them will allow you to pay your 401 k loan back to yourself, along with the interest. A kinda borrowing from your future self to the benefit of both.

Answer 7

No

Cut your expenses and/or find a way to make more money. One way to make money is join freecycle and get free stuff, then sell it on ebay. Be careful to only get stuff that you can make a profit on. Instead of going out, stay home and make something you can sell. Move to a cheaper residence. If you have car payments, sell the car and buy a cheap car -- check Consumer Reports annual car issue for cars in each price category that are reliable.

Pick up a used copy of Rich Dad Poor Dad and/or Dave Ramsey's Total Money Makeover and follow their advice.

But DO NOT cash out your 401(k).

Answer 8

NO, FORGET YOU EVEN HAVE A 401K. TALK TO YOUR CREDITORS AND GET A NEW SCHEDULE AND AMOUNT FOR REPAYING THE BILLS. OR YOU COULD GO TO THE BANK AND GET A LOAN TO PAY OFF YOUR BILLS AND YOU'D ONLY HAVE I PAYMENT. DON'T BUY ANYTHING YOU DON'T NEED. NO CABLE OR NET AND ANYTHING ELSE TO SAVE MONEY.

Answer 9

You will have 20% less if you're not at the withdrawal age and have no qualified reason.