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View Full Version : NFT: Pull Money Out Of 457/401K?


The Rick
05-03-2005, 02:00 PM
Here's a quick question. I think I know the answer, but I'll ask anyway.

I have a debt I want to pay off quickly. I don't feel like getting roughed up by a couple of thugs looking for their money.

Okay, I'm just kidding about the thugs part. :) But honestly, I just want to be rid of some debt and I don't enough spare cash on hand to pay it off right now.

I do have more than enough to pay off the debt in a 457. Is there any way to pull some money out of a 457?

So far, the only thing I've seen about pulling money out of a 457 is that it can be done when you quit your job or in the event of an unforseen emergency. I don't feel like quitting my job and don't have any emergencies right now.

I know there would be taxes that would have to be paid and possibly a penalty, but it would still be worth it to me in the long run.

Andoverer
05-03-2005, 02:12 PM
Generally taking money out of a retirement fund is not a recommended thing to do. I did it several years ago when changing jobs and I regret that I did. The penalty and taxes will be brutal and decimate the amount you hope to get. For a great strategy to get out of debt I highly HIGHLY recommend reading Dave Ramsey's book "Total Money Makeover"

Rain Man
05-03-2005, 02:15 PM
I'd consider every other option, including going on an austerity budget, before pulling money from a retirement plan. Andoverer is right - the taxes and penalties will kill you.

In answer to your direct question: I don't know.

tomahawk kid
05-03-2005, 02:15 PM
Generally taking money out of a retirement fund is not a recommended thing to do. I did it several years ago when changing jobs and I regret that I did. The penalty and taxes will be brutal and decimate the amount you hope to get. For a great strategy to get out of debt I highly HIGHLY recommend reading Dave Ramsey's book "Total Money Makeover"

Agreed. If you deceide to pull anything out of your 401k, get ready to bend over for Uncle Sam.

The tax rate you are charged for such withdrawls is absolutely horrendous.

tomahawk kid
05-03-2005, 02:16 PM
I'd consider every other option, including going on an austerity budget, before pulling money from a retirement plan. Andoverer is right - the taxes and penalties will kill you.

In answer to your direct question: I don't know.

Austerity budget?

Hoover
05-03-2005, 02:22 PM
Hoover Rant

While I'm all for private Social Security Accounts, I think its stupid for Repuublicans not to push an effort to eliminate all taxes on any tyoe of retirment accounts (IRAs, 401Ks, pensions, and Social Security). If Democrats will not offer any alternative plans, republicans should offer this as an alternative

jspchief
05-03-2005, 02:23 PM
Go find the highest possible interest on a loan allowed by law, and borrow from there...

It will still be cheaper than taking money out of retirement.

Andoverer
05-03-2005, 02:28 PM
If the money you owe is federal taxes and the "thugs" are the IRS cronies, you might pull that trigger. Being in debt to the IRS is a bad place to be and should be taken care of ASAP. Why? Because the IRS has more sinister ways to make you give up your money to them than your average credit card company or local bank does.

Rain Man
05-03-2005, 02:30 PM
Austerity budget?

Oh. Jargon. Sorry about that. My wife and I use the term to describe time periods when we've really needed to cut down our expenses, such as when we were trying to buy our first home. An austerity budget is when we cut out as many discretionary expenses as possible and closely track our expenses to make sure we're being frugal.

beavis
05-03-2005, 02:31 PM
I know there would be taxes that would have to be paid and possibly a penalty, but it would still be worth it to me in the long run.
I know you can take a loan out of a 401k, with the interest you pay going into your account. I'd look into that before I just outright withdrew the cash.

ptlyon
05-03-2005, 02:35 PM
Does your plan offer loans out of the 401k? If they do, you pay it back at prime interest with no penalty. I have done both, both cashed in my 401k when I changed jobs and taken loans out. Most definitely you get bent over taking it out prior, but a loan is a good deal. You still shouldn't even take a loan out because you are technically losing money out of the account - but in dire need, it is a nice way to take out a loan and pay yourself back, with interest, to yourself.

Hope this helps Rick.

Brock
05-03-2005, 03:07 PM
If you can take a loan from your 401, it's not a bad deal. I have seen charts, however, that indicate that it kind of puts a hurting on the projections for the future growth of the 401. On the other hand, you're paying interest back to yourself.

ct
05-03-2005, 03:13 PM
I know nothing of 457's, but agree with others that recommend do NOT withdraw cash out of a retirement plan unless it's life or death financial need. Loans out of a 401K is not pain free, but you pay yourself back, so it's all good in the end.

tomahawk kid
05-03-2005, 03:16 PM
If you can take a loan from your 401, it's not a bad deal. I have seen charts, however, that indicate that it kind of puts a hurting on the projections for the future growth of the 401. On the other hand, you're paying interest back to yourself.

It also doesn't pull to credit reports as additional debt burden, which is another huge plus.

ct
05-03-2005, 03:20 PM
Generally taking money out of a retirement fund is not a recommended thing to do. I did it several years ago when changing jobs and I regret that I did. The penalty and taxes will be brutal and decimate the amount you hope to get. For a great strategy to get out of debt I highly HIGHLY recommend reading Dave Ramsey's book "Total Money Makeover"


Thanks for the tip, I'm gonna have to read up on Ramsey. I could use some debt clearance in a bad way too!

wutamess
05-03-2005, 03:22 PM
What's the going interest rates on a 401k loan?
Say for instance is it cheaper than the 6% home lan rate or chepaer than a car loan rate?

Andoverer
05-03-2005, 03:29 PM
Thanks for the tip, I'm gonna have to read up on Ramsey. I could use some debt clearance in a bad way too!

http://daveramsey.com/

Here's his site. Dave is extremely insightful about being smart with your money. My wife and I are in the debt elimination mode thanks to him. I only wish I had run across him sooner. Best of luck to you.

Rain Man
05-03-2005, 03:38 PM
What's the going interest rates on a 401k loan?
Say for instance is it cheaper than the 6% home lan rate or chepaer than a car loan rate?

I don't think it really matters. You pay it to yourself.

Amnorix
05-03-2005, 03:47 PM
Avoid yanking money out of the 457/401(k) at all costs.

Basically, unless you're into a "going to lose my home" situation, you don't want to do it.

wutamess
05-03-2005, 03:54 PM
I don't think it really matters. You pay it to yourself.

Actually it does.
I was reading up on the difference in the types of loans and basically it said that you don't really want to borrow from your 401k as opposed to other loans.

I'll find the link if I can...

BIG_DADDY
05-04-2005, 01:51 AM
Avoid yanking money out of the 457/401(k) at all costs.

Basically, unless you're into a "going to lose my home" situation, you don't want to do it.

Good call!!

Logical
05-04-2005, 02:04 AM
Some companies offer loans against your 401K or 457, usually the interest you pay goes back into your own account. This is much better than taking money out and would still serve your needs. There are no tax or penalties on such loans. I would check with your fund manager to see if this an option available to you.

Ultra Peanut
05-04-2005, 02:06 AM
THIS IS NO GODDAMN CHECKING ACCOUNT

Stop trippin' fo I bust you, dawg.

Ultra Peanut
05-04-2005, 02:07 AM
Don't try to play me, fool.

Logical
05-04-2005, 02:08 AM
Actually it does.
I was reading up on the difference in the types of loans and basically it said that you don't really want to borrow from your 401k as opposed to other loans.

I'll find the link if I can...

The theory on why you do not want to is that theoretically the investment will earn more than the interest you pay yourself. Great in theory, but if you need the money not very practical.

If they are telling you it is better than other loans, that sounds like somebody doing a poor analysis or they do not understand the interest gets paid back into your own account.

ExtremeChief
05-04-2005, 04:01 AM
I took a loan out of my 401K. I pay it back to my account at 9%. I would think that would be better than getting a traditional loan and paying someone else the interest. I assume it varies depending upon who your 401K is with whether or not it is profitable.

ptlyon
05-04-2005, 08:25 AM
What's the going interest rates on a 401k loan?


I think it varies by your 401k "account", but I think ours is 2% over prime.

Cochise
05-04-2005, 08:43 AM
What would you end up getting if you tried to cash out your 401k, after taxes and everything? Like 50% of its value?

ptlyon
05-04-2005, 08:44 AM
What would you end up getting if you tried to cash out your 401k, after taxes and everything? Like 50% of its value?

That is about right - maybe even a little more.

Amnorix
05-04-2005, 09:50 AM
What would you end up getting if you tried to cash out your 401k, after taxes and everything? Like 50% of its value?

My understanding is that it would average something like 60%.

Of course, you're also losing tax free investment growth on that money going forward.

Basically, in terms of retirement / long range financial planning, it's about the worst thing possible. Unless you're got a truly dire emergency, don't even think about it.

My MORON brother-in-law withdrew from his 401(k) to buy my sister-in-law her engagement ring. Didn't even know about the horrendous consequences. Idiot... :shake: :shake:

Cochise
05-04-2005, 09:52 AM
My MORON brother-in-law withdrew from his 401(k) to buy my sister-in-law her engagement ring. Didn't even know about the horrendous consequences.

Yes. Marriage. :shake:

tomahawk kid
05-04-2005, 09:54 AM
My understanding is that it would average something like 60%.

Of course, you're also losing tax free investment growth on that money going forward.

Basically, in terms of retirement / long range financial planning, it's about the worst thing possible. Unless you're got a truly dire emergency, don't even think about it.

My MORON brother-in-law withdrew from his 401(k) to buy my sister-in-law her engagement ring. Didn't even know about the horrendous consequences. Idiot... :shake: :shake:

Do they take out the taxes immediatly, or do they come callin around April 15 like other capital gains tax?

eazyb81
05-04-2005, 09:59 AM
There are these guys called "financial advisors", they know this stuff pretty well and could easily answer any of these questions.

(/shameless plug)