401k
By katsmeow1213
@katsmeow1213 (28716)
United States
November 21, 2008 7:32pm CST
Do you have a 401K retirement plan through work? Have you ever taken a loan against your 401K, or taken all of the money out of it?
My husband has one through work, that he's been building on for the last 2 or 3 years. It's up to over $3,000 and he's just putting the minimum in each week.
Last summer we took a $1,000 loan out of the 401K. We were planning on purchasing a vehicle for me, but as it turns out, that wasn't enough money. We planned to finance the vehicle and they wanted a larger down payment, and the monthly payments were going to be more than we could afford.
In the end, we spent the loan on school clothes and a trip to Ottawa, Canada, and whatever was left was blown on I can't remember what. We're still paying that loan back.
Well now hubby's car is falling apart. Actually it has been for quite some time. Getting a new vehicle is difficult because we don't have any savings and can't afford a large sum of money all at once. So now he's thinking of taking all of the money out of his 401K to buy himself a car. Otherwise he will have to wait until our income taxes come back, and his car may not last that long, and we cannot survive on only 1 vehicle.
What would you do?
3 responses
@Barb42 (4214)
• United States
22 Nov 08
Isn't there a big penalty to take money out of your 401K? I know my son took some out of his years ago and was charged a penalty. You will probably will lose half of that money, if he takes all of it out now. You have to be 59 1/2 years of age before you can take it out without a penalty, but you still pay taxes. What kind of 401K is it?
@katsmeow1213 (28716)
• United States
22 Nov 08
Well we discovered we can take out the money with no penelties if we can prove a hardship, something like an eviction. There's a few hardships they allow, but the only one he's aware of is the eviction. I know without a hardship there would be tax and penalties, and we'd lose a lot of it.
He's going to claim the hardship to get the money. I mean it's his money, so why not, right?
His parents are our landlords, so they plan on writing an eviction notice for him to get the money.
I'm not 100% sure it's going to work, but he's going to try it. Right about now that seems to be our only option for getting him a car.
I don't know what kind of 401K it is, I didn't know there were different kinds.
@katsmeow1213 (28716)
• United States
22 Nov 08
Taxes are inevitable, aren't they? He was supposed to try this today, but he's not home yet so I'm not sure if he did or not. I hope it worked.
@Barb42 (4214)
• United States
22 Nov 08
My husband was talking about this awhile ago. He did tell me that, if you could prove some sort of hardship, illness, etc., you could probably take it out without a penalty. I guess you'd still have to pay the taxes, though. There are the traditional IRA's and the Roth IRA's that I know about.
@lilybug (21107)
• United States
22 Nov 08
I used to have a 401K. It got rolled over into an IRA. I have not touched it in over 2 years. I am not even sure how much is in it right now. Not a whole lot. It was around $2000 last time I looked. I only had it for a short amount of time.
I say if you really need the money now go ahead and take the loan out on it. It is not a good time to be playing with retirement money, but if it means getting a car fixed or a new car to get to work and back, then I think the decision is an easy one.
@katsmeow1213 (28716)
• United States
22 Nov 08
As I was telling my husband, nobody knows what the future is going to bring. If everyone had 401K loans back 40 years ago, well the economy was different and paychecks were like what, $50 or something? People could live on a couple hundred a month, or less even maybe. Well their 401K would have consisted of pennies and nickels saved over a matter of years. They probably figured if they had $2000 they could live for a few years off of that, but now that wouldn't even get them through a month. So what if our $3,000 we have right now only gets us through a week once we hit retirement age?
I know we do have to save something for the future, but right now I think we should focus more on today, because our finances are awful right now. We also need to think about getting the kids through college. Once they're grown we'll still have over 20 years to think about retirement, and we won't have any kids to feed, and we'll both be able to work.
@dvschic (1795)
• United States
22 Nov 08
right now is a bad time to take a loan out. 401ks are purchasing shares of stock/etc and the market is really down, so u're going to see a lot of loss in the account. i'm pouring more more more money into my account, to buy while its low and hopefully in 20 to 40 years when i retire, it'll pay off. do you own a home? or is there any other person who can loan you the money? its best to forget about your 401k and just leave the money there to grow until about 10 years before retirement. thats my plan, i made the mistake of checking it today, and i have lost 37% so far this year, SOOOOOOOOOOOO depressing!
@katsmeow1213 (28716)
• United States
22 Nov 08
My husband's 401K is not invested in anything, he has not chosen where to invest it like the company asked him to. His co workers who have invested theirs have a lot more than he does, but we are too leary about investments. So what is in it is just what he has put in and nothing else.
Besides that, from what I've heard, right now a lot of people are taking out their 401K because they are worried the government will take it from them. If we continue to build on ours, I hope the government keeps their hands off it.
