Comments on: The Real Cost of Withdrawing Retirement Funds Early http://cashmoneylife.com/early-distribution-withdrawal-penalties-ira-401k/ Money Management, Small Business, Career Thu, 09 Feb 2012 19:08:34 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Ryan http://cashmoneylife.com/early-distribution-withdrawal-penalties-ira-401k/#comment-45268 Ryan Wed, 04 Jan 2012 17:34:13 +0000 http://cashmoneylife.com/2008/05/08/early-distribution-withdrawal-penalties-ira-401k/#comment-45268 I recommend reading this article, which covers how to track down old 401k plans: <a href="http://www.kiplinger.com/features/archives/2008/03/krr-keep-track-of-your-old-401k-plans.html" rel="nofollow">Keep Track of Your Old 401(k) Plans</a>. I recommend reading this article, which covers how to track down old 401k plans: Keep Track of Your Old 401(k) Plans.

]]> By: clell moore http://cashmoneylife.com/early-distribution-withdrawal-penalties-ira-401k/#comment-45267 clell moore Wed, 04 Jan 2012 17:30:40 +0000 http://cashmoneylife.com/2008/05/08/early-distribution-withdrawal-penalties-ira-401k/#comment-45267 I work at sibley's shoes for 7years and the closed on 12/4/03 but I never got the chance to withdrawe my 401k how do I go by getting funds release I work at sibley’s shoes for 7years and the closed on 12/4/03 but I never got the chance to withdrawe my 401k how do I go by getting funds release

]]> By: Ray http://cashmoneylife.com/early-distribution-withdrawal-penalties-ira-401k/#comment-35242 Ray Fri, 30 Sep 2011 19:19:31 +0000 http://cashmoneylife.com/2008/05/08/early-distribution-withdrawal-penalties-ira-401k/#comment-35242 I will turn 65 next year and have just retired [at 64]. I received a two year severance package and won't need to withdraw from my 403b for a couple of years. My question is: Should I withdraw enough funds from my 403b to pay off my house so that I won't have to pay the loan interest on my house? I will turn 65 next year and have just retired [at 64]. I received a two year severance package and won’t need to withdraw from my 403b for a couple of years. My question is: Should I withdraw enough funds from my 403b to pay off my house so that I won’t have to pay the loan interest on my house?

]]> By: candy http://cashmoneylife.com/early-distribution-withdrawal-penalties-ira-401k/#comment-34414 candy Mon, 29 Aug 2011 12:47:52 +0000 http://cashmoneylife.com/2008/05/08/early-distribution-withdrawal-penalties-ira-401k/#comment-34414 will i still be considered for the federal and state eic credit if worked but took out retirement 401k early? And if so, can they take out the tax penalty out of that? Will that money i got early affect how much i get for credit , if i didnt take it out, would be different? will i still be considered for the federal and state eic credit if worked but took out retirement 401k early? And if so, can they take out the tax penalty out of that? Will that money i got early affect how much i get for credit , if i didnt take it out, would be different?

]]> By: Ryan http://cashmoneylife.com/early-distribution-withdrawal-penalties-ira-401k/#comment-29918 Ryan Thu, 03 Mar 2011 15:33:08 +0000 http://cashmoneylife.com/2008/05/08/early-distribution-withdrawal-penalties-ira-401k/#comment-29918 Chris, in your situation, it might make sense. the key here is to make sure you do exactly what you plan to do - make the withdrawal, set aside the cash to pay the taxes and penalties, then pay off your debt. This will eliminate the 18% interest rate you are paying. There are two important follow up steps to make sure this works in your favor: 1. Change your habits to prevent debt from creeping back into your life. The first thing I would recommend after paying off your credit cards is to start an emergency fund. Many financial advisors recommend having several months of living expenses saved. 2. Begin making retirement fund contributions again, once you get your emergency fund in place. These two steps will help you get your finances in order, give you a financial cushion, and help rebuild your investment portfolio. Again, the key is to follow through. Best of luck! Chris, in your situation, it might make sense. the key here is to make sure you do exactly what you plan to do – make the withdrawal, set aside the cash to pay the taxes and penalties, then pay off your debt. This will eliminate the 18% interest rate you are paying. There are two important follow up steps to make sure this works in your favor:

1. Change your habits to prevent debt from creeping back into your life. The first thing I would recommend after paying off your credit cards is to start an emergency fund. Many financial advisors recommend having several months of living expenses saved.

2. Begin making retirement fund contributions again, once you get your emergency fund in place.

These two steps will help you get your finances in order, give you a financial cushion, and help rebuild your investment portfolio. Again, the key is to follow through. Best of luck!

]]> By: Chris http://cashmoneylife.com/early-distribution-withdrawal-penalties-ira-401k/#comment-29916 Chris Thu, 03 Mar 2011 15:15:22 +0000 http://cashmoneylife.com/2008/05/08/early-distribution-withdrawal-penalties-ira-401k/#comment-29916 Hi Ryan, I think I may fall into the category where it makes more sense in the long-term to take a piece of my retirement to get out of debt. I have $7000 of credit card debt at 18% interest. With my income I can only afford to pay a little more than the minimum which will leave me paying it off for about 15 years with I think about $16,000 in interest, and leaves me with no emergency source of funds now. After a messy divorce and 2 years of unemployment, although I was able to qualify for a mortgage, a home equity line (which would be a more desirable way to fix this) is just out of my reach. If I take a $12,000 withdrawal from my IRA, I can immediately put aside enough money to cover the income tax on it and pay the penalty and still have enough to clear the credit card. What do you think? Hi Ryan, I think I may fall into the category where it makes more sense in the long-term to take a piece of my retirement to get out of debt. I have $7000 of credit card debt at 18% interest. With my income I can only afford to pay a little more than the minimum which will leave me paying it off for about 15 years with I think about $16,000 in interest, and leaves me with no emergency source of funds now. After a messy divorce and 2 years of unemployment, although I was able to qualify for a mortgage, a home equity line (which would be a more desirable way to fix this) is just out of my reach. If I take a $12,000 withdrawal from my IRA, I can immediately put aside enough money to cover the income tax on it and pay the penalty and still have enough to clear the credit card. What do you think?

]]> By: Ryan http://cashmoneylife.com/early-distribution-withdrawal-penalties-ira-401k/#comment-28566 Ryan Thu, 30 Dec 2010 16:40:02 +0000 http://cashmoneylife.com/2008/05/08/early-distribution-withdrawal-penalties-ira-401k/#comment-28566 Venki, I don't believe the 10% early withdrawal penalty can be waived for making withdrawals from 401k plans if you use the money for tuition. However, it is waived if you make withdrawals from an IRA and use the money for qualified educational expenses. You will, however, be required to pay income tax on the withdrawals. Since you have already left your job, you can rollover both of your 401k plans into an IRA, then withdraw the amount you need to pay for tuition. Just keep in mind you will have to pay income taxes on your withdrawals, since you haven't yet paid taxes on that income. Here are some instructions on how to <a href="http://cashmoneylife.com/how-to-rollover-a-401k-plan-into-an-ira/" rel="nofollow">Rollover a 401k into an IRA</a>. Best of luck! Venki, I don’t believe the 10% early withdrawal penalty can be waived for making withdrawals from 401k plans if you use the money for tuition. However, it is waived if you make withdrawals from an IRA and use the money for qualified educational expenses. You will, however, be required to pay income tax on the withdrawals. Since you have already left your job, you can rollover both of your 401k plans into an IRA, then withdraw the amount you need to pay for tuition. Just keep in mind you will have to pay income taxes on your withdrawals, since you haven’t yet paid taxes on that income. Here are some instructions on how to Rollover a 401k into an IRA. Best of luck!

]]> By: Venki http://cashmoneylife.com/early-distribution-withdrawal-penalties-ira-401k/#comment-28546 Venki Wed, 29 Dec 2010 18:24:38 +0000 http://cashmoneylife.com/2008/05/08/early-distribution-withdrawal-penalties-ira-401k/#comment-28546 Hi Ryan, I was working at an Ivy-league school for over 2 years, resigned the job recently and joined Grad school. Now I'm running into a financial situation, I need some money to pay my tuition. So I'm wondering about withdrawing from 2 of my 401k accounts(TIAA, Fidelity). Can 10% early withdrawal fee can be waived, since this is for education purpose? And also what would be the long term consequences if any. I appreciate your help, thanks in advance. Hi Ryan, I was working at an Ivy-league school for over 2 years, resigned the job recently and joined Grad school. Now I’m running into a financial situation, I need some money to pay my tuition. So I’m wondering about withdrawing from 2 of my 401k accounts(TIAA, Fidelity).

Can 10% early withdrawal fee can be waived, since this is for education purpose? And also what would be the long term consequences if any. I appreciate your help, thanks in advance.

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