I'm planning on getting engaged pretty soon. Instead of putting myself on a finance plan I was wondering if I could withdraw some of my 401k. I have some money from a previous job just sitting in thier plan as my current employer would not accept rollovers. it isn't much, only around 5k. But I would love to take abot 2k out to purchase a ring. What are the ramifications of doing this? Am I even allowed to? Thanks in advance for any help you could give.
2007-07-24 01:34:35 · 6 answers · asked by the coast with the most 3 in Business & Finance ➔ Personal Finance
Wow! I knew there would be penalties but I din't realize they would be so severe. thanks for the help, I think financing the ring would be a better move.
2007-07-24 01:57:31 · update #1
You're definitely allowed to. Some people ask this question and everyone just tells the person not to do it. That's fine advice but if someone simply wants to know if they can do it and what it would cost them, then we should just give you that answer. 10% penalty, taxed at your current bracket, possibly small fee from the account manager, and depending what state you live in, taxes for the state also.
2007-07-24 20:16:15 · answer #1 · answered by blackratsnake 5 · 0⤊ 0⤋
If you do, it will cost you. You'll have to pay income taxes at whatever your rate is, plus a 10% penalty for early withdrawal if you are under age 59-1/2. If you're in a 15% bracket, then 25% of whatever you take out will go to taxes, so you'd have to take out $2667 to end up with $2000 after tax. This might add up to more than you'd pay in interest on a payment plan for the ring.
Good luck.
2007-07-24 01:47:11 · answer #2 · answered by Judy 7 · 1⤊ 0⤋
don't do it. you get hit with an early withdrawl penalty & you'll get taxed on the full amount withdrawn. btw, take your former employers' 401k & put it into an IRA account. Your bank will be happy to assist you in the transfer.
2007-07-24 01:43:46 · answer #3 · answered by Anonymous · 0⤊ 0⤋
As well as the penalties and taxes, it's considered a loan and you'd have to pay it back.
And your plan might not even allow you to withdraw early.
2007-07-24 01:57:02 · answer #4 · answered by Anonymous · 0⤊ 1⤋
You can do this, but it will definitely cost you in the long run tax-wise.
2007-07-24 01:42:02 · answer #5 · answered by Sunidaze 7 · 0⤊ 0⤋
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> http://professionallab.blogspot.com
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2007-07-24 22:27:45 · answer #6 · answered by Anonymous · 0⤊ 0⤋