NFT: Pull Money Out Of 457/401K?
 

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.

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"

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.

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.

Austerity budget?

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

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.

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.

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.

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.

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.

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.

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.

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

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