Cashing out 401(k)

I wouldn't do anything without a highly qualified tax professional involved. I inherited an IRA last year. The employer that held it stated that I was getting a lump sum distribution, fully taxable, and that is the way it's going to be. End of discussion. My attorney spend time with several accountants and investment managers until she found the tax code that allowed a rollover scenario that was acceptable to the IRS , and an IRA manager with a history of doing this unusual transaction. The IRA guy basically forced the employer to do what he directed them to do, and in the end I saved about $40K. Well worth a few hundred in fees, IMHO. Good luck

State tax? What's that?

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Taxes, in excess of what are needed to fulfill the constitutionally authorized activity of government, are theft

Oh boy - that is silly. Gold and silver are both higher than they've ever been in 20 years and you think it's smart to buy gold now when it's so high? Buy low; sell high. Maybe you missed that day in class....

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Be a fountain, not a drain!

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Smart thinking, you pay yourself back rather than pay the penalty.

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Be a fountain, not a drain!

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It may appear 'smar' until you get fired, then the entire loan is due in FULL within a very short period of time, 60 days possibly. If it is not paid in full it is reported to the IRS as a distribution and you pay the 10% penalty plus the taxes.

That would definitely be a moment.

Jim

Yeah, I'm leaving this job in June and moving across the country..... so taking out a loan that will be due in full in a few months is pointless.

I've talked to our finance guy here at work and we're working stuff out. There isn't a whole lot of $ in this one anyway, and my company matched my contributions dollar-for-dollar (and we're immediately 100% vested) so even if they penalize me 30 or 40% between fees/penalties/taxes I'm still going to get out more than I put in.

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We took our 401(k) out & took the tax "hit" and the 10% penalty....about five years ago I think. Best thing we did. Paid off our debts & invested in some REAL assets.

We heard all the agruments why we shouldn't do it, but we saw the writing on the wall. Besides, who's to say that the tax rate AND penalties won't go UP in the years to come? The way the US is hurting now, I'm sure they will be doing things like that to "make up" for their "revenue" losses.

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I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them. - Thomas Jefferson

We have borrowed against our 401(k) twice. The interest paid goes to us. So we're essentially borrowing from ourselves.

Our house is paid for, all vehicles are paid for, and the only debt we have is to ourselves. We're on track for a full retirement with no stepping down in lifestyle, nor any need to rely on Social Security, since it's not likely to be well funded anyway.

I'd borrow against it, but I'd never take any out except for the direst circumstances such as prolonged job loss or catastrophic illness.

And you are (or should be) paying YOURSELF the interest

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Roger

Yeah, I am paying myself the interest....also I will be 59.5 on 1/2/12 so no penalties unless f get fired before then, just taxes.

A couple of folks mentioned gold. I would advise against this if you are using for an IRA/401k. First of all a custodian bank has to hold the coins (IRS rules), and if the SHTF, you probably wouldn't get your coins out anyway, just like all other money. I'm not sure of the legalities (or safety!) of holding these yourself when it's not an IRA, but you should find out.

Secondly, stay away from the "collector coin" type gold -- American Eagle, etc. The price markup on these coins make all other investment companies, Wall Street, Mutual Fund companies look like Mother Teresa. With gold running around $1200 an ounce, they are selling these for close to $2500 each. When it comes to selling them back if you want the cash, you are lucky to be paid $1600-$1800 each. This industry is totally unregulated and again--makes Wall Street look like saints!

I don't know where you are getting your info, but it is wrong. Today Kitco is selling American Eagles for $1,505 and buying for $1425. The current spot for gold is $1425.

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Mess with me? I may let karma take care of it. Mess with my family? I become Karma.

We cashed out Hubbys SEP IRA back in 2008 when he lost his job and we lost over 50% of its value when the economy was crumbling. Probably a poor choice in retrospect but it got our house paid off. Trouble is- the IRS is looking for about 5K from us and the State is looking for nearly 2K from us. We also did not get any refund that year and we normally would get 5K. So we got the 10% penalty PLUS lost the "refund" which was another 5%. Plus we lost 50% on the value originally. We barely got anything out of his IRA in the long run. *sighs* Anyways your answer is 10% plus it does increase your tax bracket. My husband only now has gotten a new job after 2 years of unemployment. No idea how I am going to satisify the IRS while they keep sending us bills with interest

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Personal experience. Trying to help a friend of mine make sense of it. Can't remember the name of the company, but I can send you a copy of the invoice--$2300 per in December of 2009--had to cash some in recently and got no more than $1500.

Had never heard of Kitco, but I can guarantee it isn't where the majority of people are buying theirs.