[falser]

$this->bbcode_second_pass_quote('shady28', 'F')WIW - The dollar is actually rising right now. Moreover, it looks like it is going to rise quite a bit more.

[kenohio]

Falser, if the money that your employer has contributed is NOT fully vested yet, but is fairly close to vesting I would wait until it does.

If you are determined to pull the money out of the 401k, I would suggest you just take out a loan on your 401k and use the proceeds for your other investment choices. I would then reduce your contributions down to the point of covering your loan repayment amounts and the company match.

Otherwise you are going to piss away quite a bit of your money in lost un-vested employer contributions, taxes and penalties.

Hopefully by the time you are ready to leave the position your companies contributions will be fully vested and cover most of your penalties. In the meantime you will be using the proceeds of the loan to time the market in other ways.

[I_Ride_Bicycles]

$this->bbcode_second_pass_quote('Heineken', '
')
I think that your and some other posters' questions in this forum are more philosophical than financial. Finance experts can give you only the party line, which is to hang on to tax-deferred vehicles as long as possible, or at least until you're 59 1/2. That is the right advice, but only assuming the economy can battle on, of course. Every investor has to make his or her own decision about that.

[strider3700]

I_ride pointed out exactly some of my concerns and reasoning behind having never gotten into RRSP's/401K's. Having done some research in the past day I figure I'm far better off to take my money and invest it into paying down my debt(mortgage) and buying improvements/supplies rather then locking it into the system for the next 31.5 years. Any investment into the system to save on taxes assumes that the system will remain stable and you won't just lose everything. I'm a doomer, so I have no faith that the system will be there for me even for the safest investments.

So my case is pretty simple, I have nothing in there and won't be adding since I don't get any free money from company matching;

Now if I had company matching All I need to make sure is the company matching works out to being worth more then the penalty for the early withdrawl. Then I can invest my money, get the company match on it and pull it for a profit after the taxes.... If It didn't work out to being a profit I wouldn't be putting money into it.

If I already had money in there I'd be working on the math to figure out how to pull it as quickly as possible while losing the least to taxes.

[shady28]

$this->bbcode_second_pass_quote('strider3700', '
') Now if I had company matching All I need to make sure is the company matching works out to being worth more then the penalty for the early withdrawl.

[Peepers]

I tried to make a hardship withdrawal from my 401K, but my employer told me I had to get documentation of my hardship. Namely, they wanted a letter and financial statement from my mortgage lender telling me they were going to do nasty things to me (foreclose on house, repossess car, kidnap the family, etc) if I didn't cash in part of my 401K. That kind of hardship, and documentation of same, was the only way they would let me cash in part of my 401K (max. cash in for hardship is something like $7,500).

Does this sound kosher? If not, why not? What can I do?

[Heineken]

I don't see why doomers would be worried about paying off debt, which tends to get lost in the shuffle when civilizations collapse. Instead, I'd think your financial philosophy might be to "party hearty" and live for today, given that you don't believe in tomorrow. So the attitude expressed about debt seems inconsistent with the rest of your financial stance.

The question, after you've pulled out of your 401(k)s prematurely and paid the penalties, becomes, What do I do with the proceeds? Unless you can answer that very difficult question with great skill, the damage already done gets compounded.

Probably the most rational thing for a doomer to do is use all his resources to create as sustainable a homestead as possible. One's savings, which otherwise have no future, get translated into a piece of land, a well with a hand pump, a solar-powered house, a large garden, guns and ammo, a woodstove, etc., etc. That's a rational course. Even then, however, after doomsday your homestead may be confiscated from you by the ravening hordes. Or your survival skills may not be up to snuff, and you starve or freeze.

In the end, none of these discussions and questions and calculations and choices may make much difference. "The best-laid plans o' mice and men gang aft awry."

[I_Ride_Bicycles]

$this->bbcode_second_pass_quote('shady28', '
')In most 401Ks, if you invest *after tax funds*, you can withdraw your *contributions* at any time with no 'penalty'.

[falser]

Does the penalty apply if I leave my job? So if in a few years I quit or change jobs I'd only have to pay taxes? I'd have no problems with that. It would probably be a better option than cashing out immediately, since by that time my employer contributions would be fully vested.

[I_Ride_Bicycles]

$this->bbcode_second_pass_quote('falser', 'D')oes the penalty apply if I leave my job? So if in a few years I quit or change jobs I'd only have to pay taxes? I'd have no problems with that. It would probably be a better option than cashing out immediately, since by that time my employer contributions would be fully vested.

[shady28]

$this->bbcode_second_pass_quote('I_Ride_Bicycles', '')$this->bbcode_second_pass_quote('shady28', '
')In most 401Ks, if you invest *after tax funds*, you can withdraw your *contributions* at any time with no 'penalty'.

[FarmCat]

Beware of assuming that you can take your after-tax dollars out of your retirement account at any time. Here's what happened to me:

In my 401(k) I had about $3000 of after-tax contributions and the rest (about 30K) was pre-tax. I had an urgent need for some cash to tide us over until my husband begins his new job next month, so I called the employee benefits department. Yes, there would be no taxes or penalties on the after-tax money. HOWEVER: There was no way I could only withdraw the after-tax money. Any withdrawals would come out of both pre-tax and after-tax on a percentage basis. I was shocked and talked to my credit union's financial advisor (a free service, by the way; your bank may offer the same.) He told me that yes, some funds are just set up that way and it's perfectly legal.

I got around this, though. I no longer work for this company (have not for many years), so I was able to withdraw the entire account and roll it over to an IRA at my credit union. The pre-tax money will be rolled over with no penalties since it's going into an approved retirement account. The after-tax money cannot be rolled over so they sent me a check for it, with no deductions whatsoever.

I just got the checks in the mail TODAY. Tomorrow I will cash the after-tax check and deposit the other one in my new IRA. It will only be there temporarily until I can decide on some other investments.

BTW, here's what I learned about the way the taxes and penalties would break down:

10% is taken out as a penalty for early withdrawal.

20% is withheld automatically as pre-payment of federal taxes. If, when you file taxes at the end of the year, you are in a less-than 20% tax bracket, you will get a refund of any overpayment.

Keep in mind, though, that you will also owe state income tax at the end of the year.

There may be additional taxes/penalties imposed by your state; each one is different. Wisconsin assesses a penalty equal to 1/3 of the federal penalty, or 3.33%.

So--if I had withdrawn money instead of rolling it over, the total withholding would have been 10 + 20 + 3.33 + 33.33%.

I am only in the 15% tax bracket, so I would get 5% refunded--but WI state income tax is close to 7%, so I would probably be paying another 2% in taxes at the end of the year. A total of 35.33% of my money gone.

[I_Ride_Bicycles]

$this->bbcode_second_pass_quote('shady28', '
')Actually, that is correct. By your own definitions, AFTER TAX contributions ARE NOT SUBJECT to the rules of a 401K. They are, quite simply, investments.

[shady28]

$this->bbcode_second_pass_quote('FarmCat', 'B')eware of assuming that you can take your after-tax dollars out of your retirement account at any time. Here's what happened to me:

In my 401(k) I had about $3000 of after-tax contributions and the rest (about 30K) was pre-tax. I had an urgent need for some cash to tide us over until my husband begins his new job next month, so I called the employee benefits department. Yes, there would be no taxes or penalties on the after-tax money. HOWEVER: There was no way I could only withdraw the after-tax money. Any withdrawals would come out of both pre-tax and after-tax on a percentage basis. I was shocked and talked to my credit union's financial advisor (a free service, by the way; your bank may offer the same.) He told me that yes, some funds are just set up that way and it's perfectly legal.

[shady28]

$this->bbcode_second_pass_quote('FarmCat', 'K')eep in mind, though, that you will also owe state income tax at the end of the year.

There may be additional taxes/penalties imposed by your state; each one is different. Wisconsin assesses a penalty equal to 1/3 of the federal penalty, or 3.33%.

So--if I had withdrawn money instead of rolling it over, the total withholding would have been 10 + 20 + 3.33 + 33.33%.

I am only in the 15% tax bracket, so I would get 5% refunded--but WI state income tax is close to 7%, so I would probably be paying another 2% in taxes at the end of the year. A total of 35.33% of my money gone.

[shady28]

$this->bbcode_second_pass_quote('I_Ride_Bicycles', 'O')h, sorry. I misunderstood & see what you're saying. That's pretty slick. I hadn't heard of that angle before.

I assume that if you remove your initial principle, any gains or interest will remain in the account or be subject to the penalty. Correct?

[falser]

I think I've decided to keep the 401K in place for the time being. I've rebalanced my account to be 55% money market fund, 15% bond fund, 30% international fund. I'll wait until next year when my account is fully vested before cashing it out.

I'm in the process of converting the rest of my US savings into Canadian dollars at the moment, gotta do it fast because the US dollar took another heavy hit against the CDN dollar this week. It's just unbelievable that in a few short years the loonie could (will?) be more valuable than the greenback. I never thought it would happen in my life, but now I'm absolutely convinced.

[falser]

As an update to anyone considering cashing out their 401K's...

In a coincidental turn of events for myself, I'm changing jobs. This means I can roll over my 401K to an IRA with any investment company I choose. This opens up a wide array of investment options with a lot of flexibility - I'm not stuck with the same old boring list of Large Cap mutual funds that will inevitably get crushed. I'll probably go with Etrade for oil stocks, gold ETF's - anything I want. It doesn't get me out of the early withdrawal penalties, but it's still a breath of fresh air.

So if you were on edge about your 401K - just sit tight, get your company matches and tax deductions cause it's not the end of the world (yet). You will eventually be freed to use the money however you want.

[lateStarter]

I agree. All my old 401k 'money' is now in an IRA. I have been gradually moving the stuff out of flacid Mutual and Bond Funds and into individual energy related stocks. I have a large percentage of the account tied up in a CD that is due to mature in in July 06 (5.65%). I'll probably take most of it in cash to invest in 'tangible' goods and look for opportunities to move into coal or alternatives with the balance.

Lets' hope we make it to 2007!

[kenohio]

Well, I hope you are leaving your company for a better opportunity. Anyhow if you are actually rolling your proceeds from the 401K into a qualified IRA you shouldn't have any penalties.

However if your employer's match wasn't fully vested you will lose a portion of that back into the plan.

Good luck in your new job and your investments.