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apariah · Apr 8, 2008, 08:33 AM

I was just in an accident, and I believe my car will be totaled. I think insurance will pay off the car, but this will leave me without transportation. I think I have around 2000.00 in my 401k from my previous job.

I think the taxes and penalties for early withdrawal should be around 25%, I actually thought it would be closer to 40%. Is it worth it to withdraw this money early. My biggest concern would be the any additional taxes at the end of the year. If the amount would be close to 1500.00 or more it would be. By the way, I'm 33, and should be starting a 401k with my current employer as soon as the plan is effective. Because of my age I don't think 2000.00 is that important since I need a vehicle to get to work.

However, I really need to do something rather soon.

BTW I don't expect to spend very much on a newer vehicles, I can happily drive something used for a few years.

Thank you.

ScottGem · Apr 8, 2008, 08:37 AM

I would suggest you see if you can rollover your old 401K into your new company's 401K, then take a loan against it. Your right, that the 10% penalty, plus federal and state taxes might reach 40%. Even if its only 25% that's still throwing away a lot of money.

apariah · Apr 8, 2008, 09:26 AM

The new program is several months away, I think I'll need to get another car before enrollment. More importantly, without a car I might not have a job so then I have nothing to enroll in. I live in Texas now, so I don't have to worry about State taxes, just Federal and penalties.

We have loan on my wife's car, and I can't afford or more importantly I don't want to afford another one. I would prefer to just buy something and drive it until I can't, or choose to drive something else.

But thank you for the reply

Originally Posted by ScottGem

I would suggest you see if you can rollover your old 401K into your new company's 401K, then take a loan against it. Your right, that the 10% penalty, plus federal and state taxes might reach 40%. Even if its only 25% that's still throwing away a lot of money.

ScottGem · Apr 8, 2008, 09:49 AM

The advantage of a 401K loan is that you are paying the interest to yourself. So the interest just goes into your 401K. But even if you have to wait, try and get a loan in the interim, then pay it off after you rollover the 401K. I would still not want to throw away the amount of money you are talking about.