Thinking Of Withdrawing From My 401k.

[Polygon]

So, I want to get out of debt and NOW!

I've been paying almost everything I have into my debt and it's going down but not fast enough. So, I live paycheck to paycheck since I'm overpaying on my payments. I looked and I have $5,000 in my 401k which I've never intentionally put money into. I found out that my company has been putting money from my paycheck into it over the pas 2 1/2 years and they also do 100% matching.

So, if I withdraw that I take a 30% hit which leaves me with $3,500. This would pay off my Stealth and the rest, paired with my regular payment, would drop my credit card down to $1,200. That only leaves me with a personal loan and a student loan.

This is pretty tempting to me as once the credit card is payed off I would take that $500 and month and put it with the $400 a month I would be paying on the personal loan meaning I could pay it off in a matter of months. I'm 29 and I have time to get that money back into my 401k after I'm out of debt as I can afford to pay extra into it.

I guess the question is, if you were in my shoes, what would you do?

[3000GTCSULB]

Probably not, the only reason I would consider cashing out:

1) It's an emergency.
2) It's time to retire.
3) I got a month to live and I'm blowing my savings.

[DocWalt]

Probably not, the only reason I would consider cashing out:

1) It's an emergency.
2) It's time to retire.
3) I got a month to live and I'm blowing my savings.

I agree. I have a similar situation, and no way I'm touching my 401K to make life easier on myself.

[Steve '92ES]

Look into taking a loan from your 401k. Many plans let you borrow against your account, which you will have to repay, however any interest on the loan goes to your 401 so that you're basically paying interest to yourself instead of to the CC company. Clear your loans, stop paying high interest on personal loans, use the extra money to pay back the 401. What's not to love?

[R/T93]

I took a loan from my TSP (pretty much a 401k for govt employees) to buy my vr-4, it was a 2.25% 4 yr 10000 dollar loan, its 102 dollars out of every paycheck. Its getting paid back, I have 30+ years of growth left for the fund, I thought my choice wasnt going to be a detriment to my longterm goals for the account.

There are calculators on the net showing all sorts of stuff for what kind of effects borrowing from 401k's does. Check them out before you make a decision.

[Mikes2nd]

Do the math... the 10% penalty is there to stop you, otherwise it can make sense.

this whole bs of "never" touch your 401k is for fools.

Do the simple calculation and if it makes sense then do it, nowdays borrowing money is cheap though and can hardly defeat the 10% penalty unless your jacked under a credit card with 28% interest, just remember YOU must put in extra to get back to where you were plus some.

its that simple. Ive seen morons paying 28% interest on tons of money on credit cards.

ALSO MAKE SURE your calculating CORRECTLY. Most loans are front loaded, meaning you pay the interest up front so make sure you know exactly how much your going to gain.

There is no reason to get out of a car loan at the end unless its insane interest. Credit cards are much simpler to determine if its the right thing to do esp since obama got those credit card rules(they put the total right on your statement). The 20% tax is disregarded since you pay that anyways... you pay it on your 401k and your take home pay... its the 10% that really is what matter... so yes cash it out if your paying 15%... its not worth it if its less than that actually.

yes look at loans first of course, you prob dont have enough to get a big loan but you don't take the 10% and you pay yourself back. check out insurance policies also if you have some.

[DocWalt]

10% hit on a 401k? It's more like 30%.

[Polygon]

I think that might be the way to go. I'll have to call Fidelity and see how much I can borrow and see how this all works. I would love to be able to borrow $4,000. None of my debt is high interest. I just want to get out of it fast so I can start putting money into savings again so I can have money just in case as well as put money aside for a down payment on a house.

10% hit on a 401k? It's more like 30%.

Yeah, the 20% is taxes which you pay no matter what. You only have to pay the extra 10% for withdrawing early. I think that's why he was focusing on the 10%.

[DocWalt]

Obviously borrowing on your 401K is a much better idea than just withdrawing. Go for that if you want

Ok, it was so poorly worded, I had no clue what he was saying.

[Polygon]

Well, borrowing is out. They'll only give me $1,200 and I don't plan to be with my current employer beyond the end of the year which causes problems if borrowing against the 401k.