My company is going out of Business, I want to pay my home off with my 401'k how will I be taxed on that? And also thinking of opening a business with my money will I still have to pay taxes?
2007-10-07 06:22:28 · 7 answers · asked by Dolly B 1 in Business & Finance ➔ Personal Finance
Bad idea. You should never ever ever cash or borrow from your 401(K). You will have to repay the loan from your 401(K) over the five year period, plus if your company is closing you may have to pay back the loan within days or weeks after the company closes. If you can't pay it back, you will be taxed for ordinary income on top will also pay a 10 percent federal tax penalty, and when you do pay back your loan, and you retire at 59.5 you will pay taxes again when it's time to withdraw from your 401(k).
In layman terms, if you borrow from your 401(K), you might as well get a credit card that has 40% interest.
This makes no financial sense whatsoever.
2007-10-07 07:53:44 · answer #1 · answered by Gary 4 · 0⤊ 0⤋
Just because your company is closing, is no reason to make a foolish financial decision.
You want to take your retirerement nest eg that you worked hard to save, and pull it out an pay taxes plus a 10% penalty on it?!?! Why would you do that? What does your company closing have to do with it? You know you can move that money into another IRA, right?
I would NEVER NEVER recommend doing this unless you are in dire straits, facing imediate foreclosure, and have absolutely no other choice.
Taking money out of a 401(k) and paying the penalty is a HUGE financial mistake. You'll end up getting about half of your balance after the taxes and penalties.
2007-10-07 06:29:27 · answer #2 · answered by Anonymous · 0⤊ 0⤋
You'll pay income tax as ordinary income, at whatever your tax rate is, on any amount you withdraw and don't roll over into an IRA or other tax-deferred retirement plan.
If you are under age 59-1/2, you'll also pay an additional 10% of the withdrawal as a penalty for early withdrawal.
Using the money to start a business wouldn't get you out of the taxes, or the penalties.
2007-10-07 06:52:40 · answer #3 · answered by Judy 7 · 0⤊ 0⤋
REALLY bad idea. Not only will you have to pay income taxes on the entire amount which will put you in a higher tax bracket, but you will have to pay a 10% early withdrawl penalty (unless you are 59-1/2 or older).
Roll the 401K over into an IRA. It's very simple to do and you will still have this money for retirement.
2007-10-07 06:30:25 · answer #4 · answered by bdancer222 7 · 1⤊ 0⤋
401 monies can typically be used in hardship or other specific instances. Some also require repayment at a specified interest rate which could be higher than getting a loan from a bank. Typically opening a business would not qualify for 401K use.
2007-10-07 06:27:59 · answer #5 · answered by MSouthers 2 · 0⤊ 1⤋
Put as much as you can in retirement and also put as much as you can on the mortgage. Don't put anything in stocks until after you've maxed out the 401k/Roth and paid off your house. Although mortgage rates are lower than your potential growth in the retirement funds, there is also much less risk in your own home. If your financial world started crashing around you, you would be much safer if you owned your house outright. If you factor in the cost of risk, then it makes more sense to pay off the mortgage.
2016-05-18 01:05:05 · answer #6 · answered by ? 3 · 0⤊ 0⤋
Ask Dave Ramsey~ www.daveramsey.com
2007-10-07 11:56:11 · answer #7 · answered by silversliver5000 2 · 0⤊ 0⤋