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, 21 Nov 2009 13:00:57 -0800 http://wordpress.org/?v=abc hourly 1 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.

]]> By: Marc http://allfinancialmatters.com/2007/05/17/taking-an-early-withdrawal-from-401k-does-it-make-sense/comment-page-1/#comment-122756 Marc Tue, 24 Jul 2007 03:07:43 +0000 http://allfinancialmatters.com/?p=1787#comment-122756 Are 401k disbursements taxable on state income tax? I work in California. Also, I've read somewhere about a flat rate of 30% federal income tax if one takes the money out when he/she is not anymore a resident is this true? Are 401k disbursements taxable on state income tax?
I work in California. Also, I’ve read somewhere about a flat rate of 30% federal income tax if one takes the money out when he/she is not anymore a resident is this true?

]]> By: Cricket http://allfinancialmatters.com/2007/05/17/taking-an-early-withdrawal-from-401k-does-it-make-sense/comment-page-1/#comment-120356 Cricket Fri, 13 Jul 2007 12:50:21 +0000 http://allfinancialmatters.com/?p=1787#comment-120356 I am a newbie here...didn't know there were PF blogs. I have a question: What about paying the tax on the contribution UP FRONT so only the interest is taxed and not the principal and interest at withdrawal? Just asking...and I am a semi DR fan. I am a newbie here…didn’t know there were PF blogs. I have a question: What about paying the tax on the contribution UP FRONT so only the interest is taxed and not the principal and interest at withdrawal?

Just asking…and I am a semi DR fan.

]]> By:   Some Link Love For Good Articles In the Past Week by Money Crashers http://allfinancialmatters.com/2007/05/17/taking-an-early-withdrawal-from-401k-does-it-make-sense/comment-page-1/#comment-105758   Some Link Love For Good Articles In the Past Week by Money Crashers Mon, 21 May 2007 02:53:27 +0000 http://allfinancialmatters.com/?p=1787#comment-105758 [...] JLP from All Financial Matters asks the question if dipping into your 401(k) early makes sense? [...] [...] JLP from All Financial Matters asks the question if dipping into your 401(k) early makes sense? [...]

]]> By: Roundup for week of 13 May 2007 at Mighty Bargain Hunter http://allfinancialmatters.com/2007/05/17/taking-an-early-withdrawal-from-401k-does-it-make-sense/comment-page-1/#comment-105604 Roundup for week of 13 May 2007 at Mighty Bargain Hunter Sun, 20 May 2007 04:46:29 +0000 http://allfinancialmatters.com/?p=1787#comment-105604 [...] All Financial Matters answers a reader’s question as to whether an early 401(k) withdrawal makes sense. [...] [...] All Financial Matters answers a reader’s question as to whether an early 401(k) withdrawal makes sense. [...]

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