Raiding Your 401(k): the Consequences of Cashing Out

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also...

why didn't you SAVE for something like this over the past 28 years while working for that company? you should easily have set aside the amount you withdrew from the retirement plan in that amount of time.

alan of LA @ Apr 17, 2009 11:47:22 AM

weigh your options

the previous comment is based upon an emotional reaction to employment and the economy. two items that demand a logical reaction instead.

would you rather - lose your house and lifestyle now, but be able to retire later in life?

or pay your bills now and work until you die?

the first misconception is saving one's home. it's NOT your home. it's the bank's home. i would rather lose "my" house and rent if it meant the ability to leave the workforce at some point.

the previous comment was made by a person who should have never had a 401(k) to begin with. when you invest in such a plan you are making a commitment to STICK WITH IT.

he would have been better off keeping that money in a shoe box the whole time. enjoy greeting me at wal mart in 20 years friend.

alan of LA @ Apr 17, 2009 11:44:46 AM

401k cash-out

I was laid off in Nov. 2008 with 8 weeks severance pay after 23 years with the same company. Jobs in the printing industry are non existent presently.So, I cashed what I had out. It had been in ultra conservative low bond funds for 4 years because I kinda saw this crash as inevitable. Was about 30k at the time and making very little but that was ok. Over the last year I watched it slip to 23k and held fast. I get the check and they withhold 20%. I know I'll owe another 10% at least, but my income for this year will probably be unemployment checks and I'm having taxes withheld there. I know how stupid it is to cash out, however, I am NOT gonna lose my home and lifestyle (although I have leaned out substantially) because the economy was ALLOWED to spin out of control by both banking and government misdirection. Being responsible, I'm gonna put 20% more of that check into a tax account just in case, but I do feel like the 10% penalty should be revoked for a time because ANY money released into the hands of the people is a good step to jump start spending and pull us all out of this mess.Bailing out irresponsible banks and insurance companies is the wrong way for this country to go. What happened to capitalism? Is it dead, or just brain dead?

MONEY IN THE HANDS OF THE AMERICAN PEOPLE (NOT BANKS AND INSURANCE COMPANIES) IS THE WAY OUT. Wanna get crazy? Stop all income taxes for 1 year and see what kinda spending that creates. Yeah, crazy. Like a fox!!

Tom Ford of TN @ Mar 08, 2009 09:21:28 AM

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New Money

Katy Marquardt, a senior editor at U.S.News & World Report, takes a contemporary look at happenings in the financial world and aims to help young investors get going with their portfolios--or just sound cool at cocktail parties. Have a question? E-mail Katy at newmoney@usnews.com

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