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Off Topic Off Topic - General non-Corvette related discussion. |
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03-19-2018, 7:34pm | #1 | ||||||
A Real Barner
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Anyone ever cashed in their 401k early?
So my dream of being self sufficient is coming along faster than I expected and I was told I was being laid off today. Not a huge problem, wife makes more than me and my job sucked anyway. I know there are penalties for being too young and all that crap but what does it come out to? what taxes do you have to pay on it?....BTW Im 51.
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03-19-2018, 7:41pm | #2 | ||||||
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You will owe income tax on whatever you cash out plus a 10% penalty
Unless you really have to have the money to get by, it’s a bad deal. You can roll it into an IRA and avoid the tax and penalties |
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03-19-2018, 7:43pm | #3 | ||||||
Dorkapottamus
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In a word or two, you pay usual taxes on the money plus a 10% fee for early withdrawal.
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03-19-2018, 7:44pm | #4 | ||||||
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Are you "retiring"? Not planning to rejoin the work force? Will the loss of your income mean real financial hardship (like you can't pay the mortgage) living on her income alone?
Only the imminent arrival of the repo man would prod me to unlock the 401 before we were both going to call it quit. It is your final defense against bad weather. |
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03-19-2018, 7:48pm | #5 | ||||||
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Uwww..bad idea
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03-19-2018, 7:51pm | #6 | ||||||
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LONG time lurker here. Came on and saw your post. Sorry to hear that you are out of a job, but all things happen for a reason. It sounds like you did not love the job anyway.
Yes, you can roll the money into an IRA tax and penalty free. However, as far as actually getting and spending your money, which is what I think you were getting at, there are exceptions to the 10% penalty. You will always pay tax on qualified funds and I am guessing you will not qualify for the typical hardships/exceptions. You can look into rule 72(t) which allows for substantial equal payments. If set up correctly, you can take distributions penalty free at ages less than 59.5. It can get you into deeper waters, so make sure you know what you are doing or are swimming with someone who does. |
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03-19-2018, 7:53pm | #7 | ||||||
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03-19-2018, 9:02pm | #8 | ||||||
Chief Electrician
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Taxes will be owed, but possibly not the penalty. There are hardship exceptions that may eliminate the penalty.
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03-19-2018, 9:33pm | #9 | ||||||
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NO! Dumb Idea.
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03-20-2018, 7:20am | #10 | ||||||
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Get a job at Costco if wife has a good paying job.....try to wait till proper age.
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03-21-2018, 9:12am | #11 | ||||||
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Thanks for all the input guys. I have been considering it and it may be best to wait until I can get it out penalty free in a few years. I don't have a whole lot in there and the Fidelity tool itself said I only had enough to last for 9 years or something. I plan to take that money and put it down on an apartment building and live off the rent for the rest of my life and then my kids can live off it for the rest of theirs. I do credit marketing people in the banking industry with convincing everyone that they have to have millions of dollars in their 401K to be able to live but its just not true. Yes, apartments are something I know about. It is my families business and my parents own several properties. Its something I am comfortable doing. The best thing is to put down as much as you can though on a rental property so your payments are small and pay it off quickly. You will always have taxes and repairs but as long as you know going in that you dont pocket 100% of gross rents, there should be no surprises. It also helps if you do your own repairs.
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03-21-2018, 1:50pm | #12 | ||||||
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03-21-2018, 2:13pm | #13 | ||||||
Chief Electrician
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My ex took out $44k last year. She'll be paying the tax bill on it for the next three years I am guessing. She could have taken a loan against it and paid herself back but she's a financial train wreck so the IRS gets a cookie.
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03-21-2018, 8:06pm | #14 | ||||||
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She can borrow and repay because she is still working. The OP is leaving the work force and has other decisions to make.
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03-21-2018, 11:07pm | #15 | ||||||
Chief Electrician
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03-22-2018, 7:48am | #16 | ||||||
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premature withdrawal......they hate that
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