Comments on: Taking an Early Withdrawal From 401(k) – Does it Make Sense? http://allfinancialmatters.com/2007/05/17/taking-an-early-withdrawal-from-401k-does-it-make-sense/ A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance. Sat, 11 Feb 2012 20:32:19 +0000 hourly 1 http://wordpress.org/?v= By: TheChosenOne http://allfinancialmatters.com/2007/05/17/taking-an-early-withdrawal-from-401k-does-it-make-sense/comment-page-1/#comment-442379 TheChosenOne Sun, 21 Feb 2010 00:48:18 +0000 http://allfinancialmatters.com/?p=1787#comment-442379 Sorry I made a mistake.. Rate of Return= 22% on above calculations! Sorry I made a mistake.. Rate of Return= 22% on above calculations!

]]> By: TheChosenOne http://allfinancialmatters.com/2007/05/17/taking-an-early-withdrawal-from-401k-does-it-make-sense/comment-page-1/#comment-442378 TheChosenOne Sun, 21 Feb 2010 00:47:10 +0000 http://allfinancialmatters.com/?p=1787#comment-442378 Regarding should h1b visa holders invest in 401k.. Yes A simple math.... The employer gives u a match of 100% for 3% Case one: NO 401k Investment: then I get $100 in my paycheck...Rate of return= 0% Case two: 401 Invested & say for example withdraw money next day itself.... I invest $100, Employer contributes $100 Sum= $200 I withdraw money the next day: $200 - $40 ( Tax@20%) - $16 (Penalty@10% on $160)= $ 144 Rate of return= 44% the next day itself! I know my math is stupid....but people who are on h1/f1 visa would get a straight forward answer why should they contribute to 401! Regarding should h1b visa holders invest in 401k..
Yes
A simple math….

The employer gives u a match of 100% for 3%

Case one: NO 401k Investment: then I get $100 in my paycheck…Rate of return= 0%

Case two: 401 Invested & say for example withdraw money next day itself….

I invest $100, Employer contributes $100
Sum= $200

I withdraw money the next day:
$200 – $40 ( Tax@20%) – $16 (Penalty@10% on $160)= $ 144

Rate of return= 44% the next day itself!

I know my math is stupid….but people who are on h1/f1 visa would get a straight forward answer why should they contribute to 401!

]]> By: TheChosenOne http://allfinancialmatters.com/2007/05/17/taking-an-early-withdrawal-from-401k-does-it-make-sense/comment-page-1/#comment-442377 TheChosenOne Sun, 21 Feb 2010 00:41:09 +0000 http://allfinancialmatters.com/?p=1787#comment-442377 I am not a financial advisor, but on a H1b with same situation. But most of the people say they lost money on 401k. But a recent survey showed hardly 10% people ever try to allocate thier 401, manage thier 401k. There are people who for years never tried to manage thier funds. YOU GOT TO MANAGE AND REBALANCE THE FUNDS ATLEAST ONCE A YEAR. The better you manage the 401 funds, you can sustain the loss in bad economy. Say for example, if you feel the economy is crashing, a wise person would have rebalance the 401 putting all money into conservative. The conservative fund would have given ateast 1-3% return no matter what the economy is ...coz its all CDs and Bonds... Correct me if I am wrong! I am not a financial advisor, but on a H1b with same situation.

But most of the people say they lost money on 401k. But a recent survey showed hardly 10% people ever try to allocate thier 401, manage thier 401k. There are people who for years never tried to manage thier funds. YOU GOT TO MANAGE AND REBALANCE THE FUNDS ATLEAST ONCE A YEAR. The better you manage the 401 funds, you can sustain the loss in bad economy.

Say for example, if you feel the economy is crashing, a wise person would have rebalance the 401 putting all money into conservative. The conservative fund would have given ateast 1-3% return no matter what the economy is …coz its all CDs and Bonds…

Correct me if I am wrong!

]]> By: ychuchies http://allfinancialmatters.com/2007/05/17/taking-an-early-withdrawal-from-401k-does-it-make-sense/comment-page-1/#comment-441009 ychuchies Mon, 07 Dec 2009 20:30:01 +0000 http://allfinancialmatters.com/?p=1787#comment-441009 we are purchasing a home and we have thought of using our 401k from a company that my husband no longer works for, this monies has lost in the past years than gained, we don't see it doing anything, so we decided why not put it into our house, we know there is a 10% penalty on early withdrawl but how much is federal and state taxes penalty, when we do our taxes? should we withdrawl or wait? our state is california if that makes a difference we are purchasing a home and we have thought of using our 401k from a company that my husband no longer works for, this monies has lost in the past years than gained, we don’t see it doing anything, so we decided why not put it into our house, we know there is a 10% penalty on early withdrawl but how much is federal and state taxes penalty, when we do our taxes? should we withdrawl or wait? our state is california if that makes a difference

]]> By: NELL http://allfinancialmatters.com/2007/05/17/taking-an-early-withdrawal-from-401k-does-it-make-sense/comment-page-1/#comment-409175 NELL Fri, 20 Mar 2009 02:35:26 +0000 http://allfinancialmatters.com/?p=1787#comment-409175 THE PAST SEVERAL QUARTERS WE HAVE LOST APPROX. 15,000. IN OUR 401K SAVINGS DUE TO THE STATE OF THE ECONOMY AND WE WANT TO REMOVE IT AND PAY OUR BILLS BEFORE WE HAVE NOTHING LEFT IN THERE AND WE CAN'T TOUCH IT WITHOUT PENALTY.I THINK WE HAVE BEEN PENALIZED ENOUGH AND IF WE WAIT TILL MY HUSBAND IS 59.5 THERE WILL BE NONE THERE FOR US TO USE. WE LOST 7500. LAST QUARTER ALONE AND WE AREN'T GOING TO GET THAT BACK. ANY SUGESTIONS AS TO HOW WE CAN GET THE BEST USE OF IT BEFORE IT IS GONE. WE NEED TO USE IT OR TAKE OUT A LOAN AND I THINK IT WOULD BE BEST TO USE THE MONEY WE HAVE THAN TO BORROW ON SOMETHING THAT IS RUNNING AWAY FROM US JUST AS FAST AS IT CAN. WE REALLY NEED SOME ADVISE AS WHAT WOULD BE IN OUR BEST INTEREST. THANKS. I THOUGHT 401K WAS FOR RETIREMENT, WELL WE ARE RETIRED WHY CAN'T WE USE IT. THE PAST SEVERAL QUARTERS WE HAVE LOST APPROX. 15,000. IN OUR 401K SAVINGS DUE TO THE STATE OF THE ECONOMY AND WE WANT TO REMOVE IT AND PAY OUR BILLS BEFORE WE HAVE NOTHING LEFT IN THERE AND WE CAN’T TOUCH IT WITHOUT PENALTY.I THINK WE HAVE BEEN PENALIZED ENOUGH AND IF WE WAIT TILL MY HUSBAND IS 59.5 THERE WILL BE NONE THERE FOR US TO USE. WE LOST 7500. LAST QUARTER ALONE AND WE AREN’T GOING TO GET THAT BACK. ANY SUGESTIONS AS TO HOW WE CAN GET THE BEST USE OF IT BEFORE IT IS GONE. WE NEED TO USE IT OR TAKE OUT A LOAN AND I THINK IT WOULD BE BEST TO USE THE MONEY WE HAVE THAN TO BORROW ON SOMETHING THAT IS RUNNING AWAY FROM US JUST AS FAST AS IT CAN. WE REALLY NEED SOME ADVISE AS WHAT WOULD BE IN OUR BEST INTEREST.
THANKS. I THOUGHT 401K WAS FOR RETIREMENT, WELL WE ARE RETIRED WHY CAN’T WE USE IT.

]]> By: Diane http://allfinancialmatters.com/2007/05/17/taking-an-early-withdrawal-from-401k-does-it-make-sense/comment-page-1/#comment-395190 Diane Tue, 06 Jan 2009 05:03:37 +0000 http://allfinancialmatters.com/?p=1787#comment-395190 I have a 401k thru Fidelity and my company. I want to take out money with out a hard ship. They are telling me no. I told them I would pay the penalty. Can you give me some advice on what to do next. They have said no to a I have a 401k thru Fidelity and my company.
I want to take out money with out a hard ship.
They are telling me no. I told them I would pay the penalty. Can you give me some advice on what to do next. They have said no to a

]]> By: 401k early withdrawal http://allfinancialmatters.com/2007/05/17/taking-an-early-withdrawal-from-401k-does-it-make-sense/comment-page-1/#comment-314439 401k early withdrawal Sun, 25 May 2008 22:14:40 +0000 http://allfinancialmatters.com/?p=1787#comment-314439 [...] [...] [...] [...]

]]> By: early withdrawal from 401 k http://allfinancialmatters.com/2007/05/17/taking-an-early-withdrawal-from-401k-does-it-make-sense/comment-page-1/#comment-314348 early withdrawal from 401 k Sun, 25 May 2008 17:12:50 +0000 http://allfinancialmatters.com/?p=1787#comment-314348 [...] Does it Make Sense? ... Remember that an early withdrawal from a 401k is taxed as income AND is ...http://allfinancialmatters.com/2007/05/17/taking-an-early-withdrawal-from-401k-does-it-make-sense/Considering a withdrawal from your 401k? - WTOL... they&39re literally cashing out part of their [...] [...] Does it Make Sense? … Remember that an early withdrawal from a 401k is taxed as income AND is …http://allfinancialmatters.com/2007/05/17/taking-an-early-withdrawal-from-401k-does-it-make-sense/Considering a withdrawal from your 401k? – WTOL… they&39re literally cashing out part of their [...]

]]> By: Jai http://allfinancialmatters.com/2007/05/17/taking-an-early-withdrawal-from-401k-does-it-make-sense/comment-page-1/#comment-156143 Jai Sun, 21 Oct 2007 17:00:27 +0000 http://allfinancialmatters.com/?p=1787#comment-156143 First of all the analysis is right on. However, some additional info. As a non-citizen if you leave the country after having worked on a H1B have three options for your 401(K): 1) Keep the 401(k)(most employers will let you do that if you have a minimum amount in it. 2) More often than not the 401(k) does not have low-cost funds and/or does not have all asset classes. In that case, roll over the 401(k) to an IRA an invest it in a diversified portfolio of low cost funds (My preference is Vanguard and index funds). You can go one step further and roll this over to a Roth but will need to pay taxes - both Indian as well as US but you may be able to minimize them if you time your exit & conversion properly. 3) Withdraw As someone in a similar boat the most attractive option in #2 - rollover to an IRA in Vanguard while #3 is the least attractive. Two reasons why withdrawing is not such a good option: 1) 401(k) is retirement money, so let it be there for long term retirement uses. By withdrawing you will invariably use it for some "emergency" :-) 2) Will you have diversified investment options in your home country? Is it easy for you to invest in non-indian funds in a low cost manner? If not them the IRA in the US could provide you with a diversifying element in your portfolio assuming you have an asset allocation plan. In general irrespective of where you retire you will need a retirement income to come from your investments. The sooner you start saving the better - do not let your future possible career decisions stop you from investing now because compounding time lost now will hurt you the most later. To Redrick : The analysis was for the free 3% that the employer matches. What part of the author's analysis do you have an issue with? You have a point in that beyond the 3% match the OP could invest in a taxable portfolio of low cost index funds. But that is a different question & analysis. First of all the analysis is right on. However, some additional info. As a non-citizen if you leave the country after having worked on a H1B have three options for your 401(K):
1) Keep the 401(k)(most employers will let you do that if you have a minimum amount in it.
2) More often than not the 401(k) does not have low-cost funds and/or does not have all asset classes. In that case, roll over the 401(k) to an IRA an invest it in a diversified portfolio of low cost funds (My preference is Vanguard and index funds). You can go one step further and roll this over to a Roth but will need to pay taxes – both Indian as well as US but you may be able to minimize them if you time your exit & conversion properly.
3) Withdraw

As someone in a similar boat the most attractive option in #2 – rollover to an IRA in Vanguard while #3 is the least attractive.

Two reasons why withdrawing is not such a good option:
1) 401(k) is retirement money, so let it be there for long term retirement uses. By withdrawing you will invariably use it for some “emergency” :-)
2) Will you have diversified investment options in your home country? Is it easy for you to invest in non-indian funds in a low cost manner? If not them the IRA in the US could provide you with a diversifying element in your portfolio assuming you have an asset allocation plan.

In general irrespective of where you retire you will need a retirement income to come from your investments. The sooner you start saving the better – do not let your future possible career decisions stop you from investing now because compounding time lost now will hurt you the most later.

To Redrick : The analysis was for the free 3% that the employer matches. What part of the author’s analysis do you have an issue with? You have a point in that beyond the 3% match the OP could invest in a taxable portfolio of low cost index funds. But that is a different question & analysis.

]]> By: Redrick Saggard http://allfinancialmatters.com/2007/05/17/taking-an-early-withdrawal-from-401k-does-it-make-sense/comment-page-1/#comment-155830 Redrick Saggard Sun, 21 Oct 2007 06:59:40 +0000 http://allfinancialmatters.com/?p=1787#comment-155830 I have doubts about many suggestions presented here. Why do people praise the authors so much is truly beyond me. None of the people considered a simple alternative of withdrawing from 401(k) entirely and investing in an index mutual fund. Pick a fund that invests in Europe and/or Asia (which invests in basket of currencies), and factor in the weak dollar situation (which is unlikely to change over the next 5 years). For estimates, you can pick the returns of Vanguard funds over the last 5 years. This H1B may lose on taxes with his 8% return of 401k minus 10% penalty, but gain a lot on 15% - 20% return of the index mutual fund with no penalties and no hassle to move around the world. I have doubts about many suggestions presented here. Why do people praise the authors so much is truly beyond me. None of the people considered a simple alternative of withdrawing from 401(k) entirely and investing in an index mutual fund. Pick a fund that invests in Europe and/or Asia (which invests in basket of currencies), and factor in the weak dollar situation (which is unlikely to change over the next 5 years). For estimates, you can pick the returns of Vanguard funds over the last 5 years. This H1B may lose on taxes with his 8% return of 401k minus 10% penalty, but gain a lot on 15% – 20% return of the index mutual fund with no penalties and no hassle to move around the world.

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