401K question..

[BUTCH1]

sure he has the right but if he posts it here I have the right to disagree with his actions. Just because I don't agree with his path I'm an idiot and a troll? Good grief grow up. His wife should qualify for programs and probably did way before this point. No clue why he didn't use them before now but that's their choice


She DID qualify for programs but I wanted my own bought insurance vs free, now I have to do a lot of checking around to see what we might qualify for. I don't even know if my unemployment would go through anyway, I'm sure the company will try to fight it, they have that right..

 

[skimple]

Butch, I am sorry to hear about your situation. Where I work, the average age is low 50's and we have been having lay-offs for years. People don't appreciate how much more serious this can be at this age.

You already know that you will take a hit on your 401k - but I understand that sometimes a bad option is the only option. The only thing that I can suggest is that you consider where your annual income will end up this year, and what your tax rate will be.

If you pull the money out, you can't avoid the penalty, but you might be able to impact your income tax rate. For example, if you get layed off late in the year, its often better to wait until the next year before pulling any money out because your income might be lower. Considering its only April, it may be hard to wait that long.

Before touching that money, I would schedule time with an unemployment counselor and someone from Medicaid. Believe it or not, I have heard of couples getting divorced to improve their eligibility for certain programs. I am not suggesting this as a course of action, but as you talk to people, make sure that you understand the differences between what you qualify for as a couple and what your wife might qualify for if she divorced. There are a lot of programs designed to help out women, that men simply do not have access to.

Good luck

 

[Jeffg010]

Kids are NOT a business or some kind of investment.

And you are wrong, they give you WAY more than you can EVER get with ANY amount of money.

But you see, some people don't give a shit about materialistic things or money.....I know I know, I'm a weird creature.

WTF are you babbling about? The tax credit is what $1000 are saying you spend less then that on your child a year? Where did I say it was like a business or investment? You are such a dumb ass at times.

 

[BUTCH1]

Butch, I am sorry to hear about your situation. Where I work, the average age is low 50's and we have been having lay-offs for years. People don't appreciate how much more serious this can be at this age.

You already know that you will take a hit on your 401k - but I understand that sometimes a bad option is the only option. The only thing that I can suggest is that you consider where your annual income will end up this year, and what your tax rate will be.

If you pull the money out, you can't avoid the penalty, but you might be able to impact your income tax rate. For example, if you get layed off late in the year, its often better to wait until the next year before pulling any money out because your income might be lower. Considering its only April, it may be hard to wait that long.

Before touching that money, I would schedule time with an unemployment counselor and someone from Medicaid. Believe it or not, I have heard of couples getting divorced to improve their eligibility for certain programs. I am not suggesting this as a course of action, but as you talk to people, make sure that you understand the differences between what you qualify for as a couple and what your wife might qualify for if she divorced. There are a lot of programs designed to help out women, that men simply do not have access to.

Good luck

Thank you, I was actually thinking about that fact last night but I didn't want to bring it up with her this soon, I might luck out and land a job that offers benefits (although they are getting less and less it seems)..

 

[Schfifty Five]

Another thought. You could keep your 401k with the employer who fired you and take a loan out against it. That might be better than just cashing it out.

 

[BUTCH1]

Another thought. You could keep your 401k with the employer who fired you and take a loan out against it. That might be better than just cashing it out.

They offered that option but only if it was paid back through payroll deductions and since I'm not on the payroll anymore I don't think it's possible..

EDIT: Time for me to get my ass moving, thanks for all the support guys..

 

[stlc8tr]

Another thought. You could keep your 401k with the employer who fired you and take a loan out against it. That might be better than just cashing it out.

You can't do this as an ex-employee.

In fact, that's one of the big arguments against taking out a loan from your 401K. You have to pay it back immediately if you leave your job for whatever reason.

 

[jupiter57]

What are you 9 years old? Stop being such a shit. You are acting like the wuss who kicks a man on the ground after he has already been pummeled. The lack of maturity is amazing. Tell your parents they should take your computer away until you learn manners.

He's not wrong. If you're in a situation where you're even considering touching your 401(k) after losing your job (especially immediately after), you did it wrong. Just needs a little more tact.

Sorry I agree with him. You do need to prepare before it happens. I seen it far to many times where old guys get to retirement age and have nothing. Then they end up mopping floors for the rest of their days just to get by. He has been working for 17 years and all his 401k is worth is 25k? I hope more people see butch's situation and learn from it.

Out comes the ATOT "Retirement" gurus! :whiste:

Maybe Butch didn't have the luxury of living with his parents until he was 40, like most of you will, saving everything other than beer & video game money!

Butch, you're close to my age, we did things different in our day, I left home at 17, joined the military, and had been working up until 2 years ago.
Luckily, I had a Union pension paid in full from which to draw, only had a 401K after I left the Union & went into management. In that 12 years, I amassed just under $30K. (My employer went out of business due to the loss of their biggest client)

My payout on that $30K would have only amounted to ~$100-$150 mo. had it remained even somewhat stable until I could draw off it.
Not worth it, IMO. When I was watching my balance drop over $100 a week, I cashed it out at ~$24K, they held out the (10%-20%?, I can't remember which). The actual tax hit was negligible come tax filing time (Probably amounted to >5%!)

I have used that money wisely and so far have managed to double it in 3 years, and still going, no way it was going to give me that kind of return sitting in my account without anything being added to it.

At the worst, I would leave it alone (unless it starts losing value) until you really do need it.
I wouldn't think twice about cashing out if it came to that. It would be much better than trying to live on Credit Cards or loans.

In other words, no, it will not kill you financially to cash it out, use what you need, and roll the remainder over, if you need to.
Sometimes a mans gotta do what a mans gotta do!

 

[darkxshade]

You only have 25k in your 401k? If that's all you got at 56 I honestly don't think it makes much of a difference whether you take it out now due to an emergency or later in retirement.

Isn't there some kind of exception where you can take an early withdrawl on a 401k due to hardship? I would think medical would be a valid reason.

 

[jupiter57]

I realize life happens and things get out of control, especially when you get fired from a job. However I will not agree with the immediate use of welfare as a legit option until every other one has been exhausted

if your wife is disabled and unable to work can she not receive the assistance? I would think that should be your first step is making sure she is covered and provided for before you start raiding the savings you may have.

Hey, kid!
Unemployment IS NOT WELFARE!

It's clear you have never had a job, or you would know that Unemployment Insurance is paid into entirely by the EMPLOYER (and to a lesser degree, the employee, as if the employer did not have to pay this tax, he could theoretically afford to pay the employee more).

Now go back to your video game, the adults are trying to have a discussion.

 

[JTsyo]

Hi all, bad news for me today, I got fired from my job of 17 years, I'm debating cashing out my 401K until I can find something else, my question is, if I got the 25K (which is about what I'd see after the tax whoppin) ...

i'm 56

D:

 

[dr150]

As the above people mentioned, DO NOT cash out your 401k if at all possible - roll it into another fund so it doesn't get taxed. I made this mistake earlier in my career and have come to heavily regret that decision.

Regarding COBRA, it's ridiculously expensive, I never was a fan of it and never have used it.

^^^
This.

Take an old 401k, roll it over into Traditional IRA, then convert into a ROTH IRA (in these successive steps). All the future gains will be yours for life. Not taxes to pay on it ever again.

The reason to do this is with the almost certain assumption that taxes WILL go up and you will pay more in the future on that old 401k than doing this transition today. That's why big-wig wealth advisors are driving their clients in the droves into this scheme.

Yes. You pay the tax now but you can break down the tax hit over more than one year with your tax guy.

You can also get bonus money for transitioning old 401ks to IRAs:
http://thefinancebuff.com/huge-bonu...schwab-td-ameritrade-etrade-merrill-edge.html

The likes of Etrade, Ameritrade, Fidelity have a dedicated group of people that'll hold your hand through each step for FREE--on the phone or at their offices.

Make sure you choose a lower risk broad market domestic large cap index fund with low fees like VOO (tracks the S&P better than competing ETFs like the more expensive SPY) or VYM (if you like higher dividend returns). Don't forget to enroll it in your brokerages DRIP program so you don't have to actively manage the dividend payouts.

 

[iRONic]

Best of luck, Butch.

 

[PenguinPower]

You can't do this as an ex-employee.

In fact, that's one of the big arguments against taking out a loan from your 401K. You have to pay it back immediately if you leave your job for whatever reason.

That's not technically correct. It depends on the what plan document states, though most do not allow.

You also, typically, have 60 days to pay it back if your employment is terminated.

 

[Schfifty Five]

D:

Confused by your post.

 

[rcpratt]

Confused by your post.

It's commentary on the fact that he saved $25k in 17 years.

 

[iRONic]

It's commentary on the fact that he saved $25k in 17 years.

Post-tax if he accesses it.

 

[rcpratt]

Post-tax if he accesses it.

Yes, the specific number is not exactly relevant, I was just translating the intent of said post.

 

[iRONic]

Yes, the specific number is not exactly relevant, I was just translating the intent of said post.

Understood.

 

[JTsyo]

Confused by your post.

OP is in trouble even if he finds a job. Though right now, retirement is probably not what's on his mind. Let's say the full amount is $30K. At the usual 4% withdrawal during retirement, that's $1.2K per year ($100/mth). Not sure if he has a pension or something else but it might not be enough of a retirement fund to worry about using now. I agree with everyone else that it should be a last resort but using it is not going to be the difference in his retirement quality.

 

[Jeffg010]

You guys better not take about that or jupiter will chastise you and call you a worthless lazy adult.

 

[Schfifty Five]

Yes, the specific number is not exactly relevant, I was just translating the intent of said post.

ah, i see. I missed out on the bolded "25k". ty.

 

[rcpratt]

You guys better not take about that or jupiter will chastise you and call you a worthless lazy adult.

We had been doing such a good job ignoring it :whiste:

But what does anybody here know...we're all in our parents' basement playing video games. Or something.

 

[darkxshade]

17 years is how long he's been in his most recent job. He said he's been working since 1974 so that's roughly 40 years. No offense to the guy but outside of a pension or other retirement funds we don't know about, 25k is a joke if that's all he has saved after all this time.


So he'll take a hit if he takes it out now but really it makes not much of a difference although relatively speaking we can argue 25k is worth a lot to him... Anyway, at his age, that 401k should be invested conservatively at this point so keeping it stashed for another 9 years until retirement would net him what, about 50k at retirement? And if he's investing aggressively then he risks taking a hit if the economy goes apeshit again. Coupled with the fact that he's now out of a job means he's not even making additional contributions to it.

So while I agree he should not take it out if he can help it, doing so isn't exactly going to crush him a decade from now. And it does, it wouldn't be because he cashed out his 25k retirement at 56. That said, my suggestion would be to throw out what you think you're worth salarywise and find a new steady job with good benefits pronto.

 

[stlc8tr]

That's not technically correct. It depends on the what plan document states, though most do not allow.

You also, typically, have 60 days to pay it back if your employment is terminated.

You're right. It's very rare for a plan to allow for ex-employees to borrow against their accounts but there are a few that do.

More info for those interested in 401k loans can be found here.

http://www.401khelpcenter.com/loans.html