Withdrawing from 401K..Question

Cherokeekid88

Cherokeekid88

Well-Known Member
Joined
Jun 30, 2007
Location
High Point, NC
Wife and I were talking last night and talking about the if the AC went out or something happened to the house and we didn't have the money to pay for it, what would we do?

While we are just now being able to save and have some money set aside, we wouldn't have thousands of dollars to put out to pay for a major car repair or something alike.

I wanted to at least have a plan of action in place or at least a viable option if we didn't have any other options.

Anyone know the rules for withdrawing from your 401K? I'm not talking about $10k or something...lets say $3k or under? what are the rules for doing so?
I know that its not ideal to withdraw, but I would just like to know in case we ever needed to look in this direction.
 
Every plan is different. Ours has an APR just like any other loan. You need to contact your rep. or go online and see what they can do for you.

We can take out a loan and have it in 2-3 business days. We can only borrow what we have in there but all the APR goes to the 401K provider.

We can also file hardship. In which I did like 8 years ago and still today I think it was the best move I ever made. I got back in the game this year.
 
6BangBronk said:
Every plan is different. Ours has an APR just like any other loan. You need to contact your rep. or go online and see what they can do for you.

We can take out a loan and have it in 2-3 business days. We can only borrow what we have in there but all the APR goes to the 401K provider.

We can also file hardship. In which I did like 8 years ago and still today I think it was the best move I ever made. I got back in the game this year.
Click to expand...
is getting a loan from your 401k usually a cheaper interest rate than a traditional loan?
 
Open up a savings account at your bank and name it 'emergency savings account'. Set a certain amount to be transferred from your checking account to the new emergency savings account every month and don't touch it except for emergencies.
 
Again, they are all different and usually the APR's float around like all others. It depends on the day you withdraw.

Honestly, nobody will be able to give you the exact answer unless you just give US the number to your 401K provider to call and ask.:flipoff2:

Who's it with?
 
drkelly said:
Open up a savings account at your bank and name it 'emergency savings account'. Set a certain amount to be transferred from your checking account to the new emergency savings account every month and don't touch it except for emergencies.
Click to expand...
this is what we started a few months ago. We had been doing good, but then when we got married back in April, it all went to hell. We didn't want to go in debt to get married, so we basically emptied our savings to get married and now we are starting back up again.
 
I took 10 g's out of mine a few years ago, and after paying penalties and paying income taxes on it, it cost me about $2500. Not Ideal, but it was neccasary.
 
As stated, your best bet is to establish an emergency fund. Begin with $1000 (or $100 if that's a stretch) and keep channeling money into it until you have at least 6 months of living expenses in it. Borrowing from your 401K is VERY risky. If you were to lose your job after borrowing from it, there's a good chance it will not get paid back in and then you lose all the tax benefit from the 401K and it's a lot of paperwork.
 
I like the suggestion that @drkelly made. I did the same thing a few years ago. In fact I had BofA remove that fund from my online portal so I cannot even see the balance so I don't do something stupid. :lol: Money goes into it every month so I can do a rough estimate in my head of what will be there, but I have to physically go into the bank to withdraw or transfer from that account. As much as I travel for work, this also serves as a backup plan in case I lose or someone steals my wallet, identity theft etc. Might be a pain in the ass at the time to go to a branch and do all of this, but you can still get your money and freeze all the other accounts that are attached to whatever is in your wallet without a major setback. Whatever the amount you have deposited every month is, after about 2-3 months, you honestly forget about it as you adjust your spending to accommodate not seeing that amount in a checking account.

I withdrew from my 401k when I left Lowes and moved to Charlotte from Boone to cover my moving expenses. At the time Lowes had a payout plan with a minimal tax penalty if your 401k balance was under a certain number. Yeah I took a small hit, but at the time as a recent college grad, I didn't have shit in savings so it was my only option. Thats about the only time I recommend withdrawing from a 401k is if it the ONLY option you have. Why pay a tax penalty to withdraw your own money?
 
Worst case scenario is borrowing from your 401k as mentioned above.

Is your credit good? Right now it's possible to get a credit card with over a 3k limit and have 0% interest for 18 months.

Google credit card offers.
Even asking the bank for a loan is a better option than borrowing from 401k.
 
One thing you should not do at all cost is use your 401k money..

as others stated save whatever you can, hell even borrow from family before you pull from 401k. You will hate your self when you try to retire and realize that money you took out made a HUGE difference in the long run..

One of the worst things we ever started letting people do is borrow on there 401k. I see it every day where good people get themselves in trouble because they see the money and borrow against it.

Yes I work for a financial firm.
 
I've borrowed a couple of times from the cash value in my life insurance policy. Easy as pie, make a call, direct deposit next day.

X2 on the extra CC if you can.
 
My recommendation would be to get a second job for a couple of months. Or if that's not an option find a way to drastically reduce your spending for several months. In the general scheme of things $3000 is not that much. How much are you putting towards your 401k now percentage wise? Is there anything you could sell to give you a chunk of change for savings? If your wife is good looking, she could easily bring the kind of money you're talking about.
 
Last edited:
Don't remove from the 401 unless you absolutely have to. If your plan offers a loan option check that out, a previous plan I had did but it also suspended contributions for a year so I lost out on employer matching.
 
This past November my 20 year old gas pack heat a.c. unit at the house finally busted the gas burner. With decent credit, wells fargo offered up to 12k contractor credit account for 4 years at 0%. This was an easy decision vs raiding the 401k as I don't have several thousand sitting around.
 
No two 401k's are the same but I'll be that one...

Contrary to what everybody says for I got preached at by everybody I worked with at the time and hear this same over and over. And see it from all the replies here as well. Of course I'm one that HAS to find a way under a road if everybody is told to walk across.:lol: But that's beside the point.

There is stipulations, but the only way I'd say taking from the 401K was a good idea would be if it was possible for you to go ahead and take the penalty off the top and be done and walk away ahead with absolutely no surprises later on in life. The amount of taxes that we're penalized is ONLY going to go up, never down. And the age of retirement is only going up. What good is extra $ when you're 68+ years old tell me?????

My employer matched 100%. So that, 35% penalty off the top isn't shit after you just averaged 20-40% monthly (compounded X2 by match) for about 12 years worth of bouncing around high risk. State and the penalty is due immediately, but Federal isn't due for another year so there's an extra 7%+/- loan for a year.

But another stipulation would be to fully purchase something. Not just blow it. Like I did a house, totally refurbished another house, bought a couple cars, a bobcat, dump truck, some tools, and so on. I still work at the same place and everybody that hung on has just over what they did 8 years ago when I pulled out.:flipoff2: And I'm back in doing the same thing that got eyes rolled when our 401K dude would come by. 100% high risk baby!!! Just checked and I'm 13% so far for this quarter.:rockon: Not the most money by a long shot but I do have the best return going in our plan...

My 95 year old refurbished house is up to date with nothing to fix which equates into a lot more time at the shop (and a happy wife). My dump truck and bobcat has made three fold or more their value in return and still going strong. And my rental house pretty much has a guarantee return no matter what the stock market does.

Again, 401K withdraw was the best decision that changed MY life in much needed early stage contrary to what 99% seems to preach on this subject. My mom and my wife was behind me being my only 1%. And nothing says the stock market will be good forever??? DOW's taking a major hit today.

Would anybody still tell you not to if SHTF tomorrow??? o_O It would only take 1 bad decision or crazy instance to put us in a position where we couldn't get our own money out no matter what bank it's in. And the odds of bouncing back into another recession is pretty high right now as well.

I don't know you're situation but if anything like mine, I'm envied now by a lot of folk I work with for I have a second option if this company ever cuts back to 15-20 hours a week again. I'm soooo glad I did what I did.

And I ain't got to worry about 115 year old plumbing if I even make it to age 67...

:beer:
 
jeepinmatt said:
My recommendation would be to get a second job for a couple of months. Or if that's not an option find a way to drastically reduce your spending for several months. In the general scheme of things $3000 is not that much. How much are you putting towards your 401k now percentage wise? Is there anything you could sell to give you a chunk of change for savings? If your wife ia good looking, she could easily bring the kind of money you're talking about.
Click to expand...
My company matches 6%, so I put in 7% and I am aggressive. been doing pretty good lately. I told my wife the other night that I might have to start hookin and take one for the team.
We are not in dire need of money right now, but if something were to happen tomorrow, we would be screwed.
 
I borrowed from mine a few years back. My 401k let's you borrow up to half of your balance with a 50k max. Max loan term is 60 months and the apr is usually around 6%. The interest is paid back to the account the only fee is a yearly maintenance fee of about $50. I borrowed a bit from it a few years ago when the economy wasn't hitting on much. Our stock was at $50 share then and is now at $280. If I had that money out when it was jumping up would have screwed me big time.
 
We just had our entire AC system replaced. It was $4500 and that was the Air Handler, Duct work, Heat Pump... Everything except the registers in the floor. the AC guy offered a payment plan as an option. We were able to pay cash, but I would have taken a payment plan over touching a 401K anyday.
 
drkelly said:
Ask any 68+ year old if they would like to have more money.
Click to expand...

To buy a new shuffle board stick or a better domino set? LOL

Reality, unless you have other arranged income, you are a fortunate inheritor, or lottery winner, the offset with no 401K and you still like to eat food is that you will be working til you die unless you accept what little you get from Social Security if that even exists years from now.
 
6BangBronk said:
No two 401k's are the same but I'll be that one...

Contrary to what everybody says for I got preached at by everybody I worked with at the time and hear this same over and over. And see it from all the replies here as well. Of course I'm one that HAS to find a way under a road if everybody is told to walk across.:lol: But that's beside the point.

There is stipulations, but the only way I'd say taking from the 401K was a good idea would be if it was possible for you to go ahead and take the penalty off the top and be done and walk away ahead with absolutely no surprises later on in life. The amount of taxes that we're penalized is ONLY going to go up, never down. And the age of retirement is only going up. What good is extra $ when you're 68+ years old tell me?????

My employer matched 100%. So that, 35% penalty off the top isn't shit after you just averaged 20-40% monthly (compounded X2 by match) for about 12 years worth of bouncing around high risk. State and the penalty is due immediately, but Federal isn't due for another year so there's an extra 7%+/- loan for a year.

But another stipulation would be to fully purchase something. Not just blow it. Like I did a house, totally refurbished another house, bought a couple cars, a bobcat, dump truck, some tools, and so on. I still work at the same place and everybody that hung on has just over what they did 8 years ago when I pulled out.:flipoff2: And I'm back in doing the same thing that got eyes rolled when our 401K dude would come by. 100% high risk baby!!! Just checked and I'm 13% so far for this quarter.:rockon: Not the most money by a long shot but I do have the best return going in our plan...

My 95 year old refurbished house is up to date with nothing to fix which equates into a lot more time at the shop (and a happy wife). My dump truck and bobcat has made three fold or more their value in return and still going strong. And my rental house pretty much has a guarantee return no matter what the stock market does.

Again, 401K withdraw was the best decision that changed MY life in much needed early stage contrary to what 99% seems to preach on this subject. My mom and my wife was behind me being my only 1%. And nothing says the stock market will be good forever??? DOW's taking a major hit today.

Would anybody still tell you not to if SHTF tomorrow??? o_O It would only take 1 bad decision or crazy instance to put us in a position where we couldn't get our own money out no matter what bank it's in. And the odds of bouncing back into another recession is pretty high right now as well.

I don't know you're situation but if anything like mine, I'm envied now by a lot of folk I work with for I have a second option if this company ever cuts back to 15-20 hours a week again. I'm soooo glad I did what I did.

And I ain't got to worry about 115 year old plumbing if I even make it to age 67...

:beer:
Click to expand...

1st most people are now living well into there 70's if not 80's and some even longer so having money when you are 68+ is a HUGE thing..

my parents are in there 70's and did not invest or save well and my dad still has to work to this day to pay the few small bills they have.. so trust me when I saw they wish they had saved more..

also if your co workers are still at the same level they were when you took all your money out then your 401k SUCKS and they should all take there money and put it into another savings account.

I work with one of the most well respected 401k Financial specialist in the US and she will tell you that you are nuts to not be saving. If your company matches then take advantage of it and keep doing the 401k But don't put all your money into one basket. Diversify
 
6BangBronk said:
To buy a new shuffle board stick or a better domino set? LOL

Reality, unless you have other arranged income, you are a fortunate inheritor, or lottery winner, the offset with no 401K and you still like to eat food is that you will be working til you die unless you accept what little you get from Social Security if that even exists years from now.
Click to expand...

You have a different view of retirement than I do. Not all old people sit on their ass. My 75 yr old mother and 80 yr old father are perfect examples.

You can have plenty of money for a comfortable retirement if you start contributing heavily into your 401k when you are young.
 
To correct my post, it's none of my business and I have no access to know so I have no idea what the other employees have, just what they say they have??? But I do have access to know that they are well diversified and ranging between in the negative to +4.8% tops right now compared to my 13.1%.

Every 401K specialist to sit in front of me has rolled eyes to go on to the next person.:shaking: I'm a gambling man, what can I say?

But wait... I am diversified. I have a rental house, equipment, a shop with tools and know-how, a full time computer job (as of today anyways), a side lawn business, side moving business, land, antiques, alot of apocalypse items such as 50-60 gallons of fresh spring water at any given minute, HP 78/79 Snowfighter Dana 60's out the ass to sell off to you guys :flipoff2: and a stash of cash in an undisclosed location at my home.

As for a 401K diversification, why would I ever want to settle with any amount of money making 4-5% max in return (and no guarantee at that much) when even real estate averages 7%+??? And then the unavailability to withdraw any lump sums after retirement of my own hard earned money??? And as said, it's 35% and 67 now, what will it be in 20-25 years?

I agree with everything you all have said but there's definitely 2 sides to this... We indeed all have different views and a 401K nipple isn't life's only answer. And quite possibly even a bad mistake??? Will be interesting to keep in touch to compare when the time comes to whatever happens to ALL of us in the future! :beer: None of us have a crystal ball to say that a 401K will amount to anything unless you settle for a low guaranteed interest.

Do keep in mind I had nothing but a bag of clothes and a piece of crap 3 cylinder Chevrolet Sprint that was dying at every stop just 20 years ago when I gambled and came here looking for a job. I have absolutely "0" inheritance. And if it wasn't for withdrawing my 401K I would still be driving the same truck I finally retired after being driven for 15+ years (Ole Duke everybody knows me knows of). And nothing but an empty shop and unstopping cast iron plumbing and changing out the old fuses since we only had 3 120V's and extension cords everywhere. Plus the $300+ electric bills from drafty windows and no insulation.

You gotta know when to hold em. Know when to fold em. Know when to walk away and know when to run. :)
 
Back
Top