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    krissy74's Avatar
    krissy74 Posts: 6, Reputation: 1
    New Member
     
    #1

    Apr 16, 2006, 11:34 AM
    Need money from my 401k
    Hello,
    I was just wondering if anyone knew the answer to this question. I am only 31 and I want to cash out my simple 401k that I have now and am still with the same emloyer. I want it to pay off my debt. Is there anyway I can get that money? I don't care if I pay a penalty at this point. Do I have to roll it over to a IRA first before I can withdraw it? I s there anyway at all I can get this money?
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
    Computer Expert and Renaissance Man
     
    #2

    Apr 16, 2006, 02:15 PM
    You will pay a 10% penalty for early withdrawal. Plus the deferred income would be taxable in the year of withdrawal. I would only do this as a last resort.

    A better alternative would be taking a loan against the 401K. Most plans have a loan provision and the interest rate charge is generally competitive. But the kicker is that interest goes back into you account. Basically you are borrowing the money from yourself and paying yourself back with interest.

    So, the options are cash out, lose 10% of the value, plus get a big tax bill. Or take a loan and preserve the savings but increase them. I would go with the loan.

    Talk to the plan administrator about what your options are.
    fredg's Avatar
    fredg Posts: 4,928, Reputation: 674
    Ultra Member
     
    #3

    Apr 17, 2006, 06:08 AM
    HI,
    I still have some money in my 401k plan. I had to withdraw some two years ago. I am 64 yrs old, and past the point where there was a 10% penalty.
    I agree with the answer before mine, about calling your Plan Administrator; might be your Human Resources Manager.
    Also ask if you are fully vested. If your company has been making contributions, you might not get that amount the company has added until you are fully vested.
    But, you can still get what you yourself, have contributed.
    There will also be at least a 20% amount withheld for taxes.
    So, with the penalty and the taxes, you might only get a check for about 2/3 of what you have in the 401k. Your Plan Administrator can expain it.
    I do wish you the best.

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