: Anyone Else Find They Have No Access To Their 401k?


PaPa Johns 77
Mar 2nd, 10, 3:05 PM
My wife just tried to get some money out of her 401k and discovered that except for a hardship (which doesn't cover auto repair) she cannot access until she either leaves the company or turns 59 1/2!:confused:
From what the guy said this is a recent change in the companies policy that took affect last year!

69 Daytona Yellow 3 Speed
Mar 2nd, 10, 3:08 PM
My wifes is the same way....I wish i could of pulled it out before the crash.

GenPac
Mar 2nd, 10, 3:08 PM
You should be able to, at the very least, take out a secured loan against the 401k holdings.
This is probably specific to her company's 401k servicer.

JWagner
Mar 2nd, 10, 3:30 PM
From what I remember of the rules, any withdrawal prior to age 59.5 is hit with taxes plus a 10% penalty for early withdrawal.

PaPa Johns 77
Mar 2nd, 10, 3:48 PM
You should be able to, at the very least, take out a secured loan against the 401k holdings.
This is probably specific to her company's 401k servicer.

There is no way to pull out any funds (not even a loan) except for a hardship according to the plan. Period.
I just went into her plan and went to zero on her contribution. Not putting another dime in if I have any access to it.:mad:

GenPac
Mar 2nd, 10, 3:58 PM
There is no way to pull out any funds (not even a loan) except for a hardship according to the plan. Period.
I just went into her plan and went to zero on her contribution. Not putting another dime in if I have any access to it.:mad:


Well, thankfully it's not all 401k plans across the board. Was you wife notified at all about this change? Seems drastic... Like the next step is looting the company pension plans.

forcd ind
Mar 2nd, 10, 4:20 PM
if you could draw, certain amounts are hit with the 10% penalty-wether you can draw or not is up to the plan you have-if you change jobs, you can roll it over into another plan
ck and see if you can draw a loan against it

Georgia69
Mar 2nd, 10, 4:32 PM
I think you might have gotten some bad information. The company and/or plan can restrict your access to COMPANY MATCHING funds, if any, but your money that you put in there is yours to use, subject to taxes and the 10% penalty discussed above. You can either borrow against it, if the company and/or plan allows, or you can simply withdraw, which the company has no control over.

webfoot
Mar 2nd, 10, 4:33 PM
Not trying to piss anybody off, but they are called "retirement plans" for a reason. Just my 2 cents.

PaPa Johns 77
Mar 2nd, 10, 4:57 PM
I think you might have gotten some bad information. The company and/or plan can restrict your access to COMPANY MATCHING funds, if any, but your money that you put in there is yours to use, subject to taxes and the 10% penalty discussed above. You can either borrow against it, if the company and/or plan allows, or you can simply withdraw, which the company has no control over.

We spent over an hour arguing this with Merril Lynch and it is how the 401k plan was structured for Wal-Mart. We were on line at the same time andhe directed us to the parts of the plan the say this!
I will say it is a shame on us for not keeping up on this information and making adjustments accordingly.
I know Wal-Mart just settled a class action on a former 401k plan they had.

hpsherlin
Mar 2nd, 10, 5:25 PM
My job with the State of GA does NO matching funds at all.
Everything in my 401K is put there by me.
I cannot access it either. No loans, no withdrawals except for hardship and dang hard to prove a hardship.
I thought it was strange also that I had no access but whatever.............
another furlough day this coming friday.

jpete
Mar 2nd, 10, 6:05 PM
My wife just tried to get some money out of her 401k and discovered that except for a hardship (which doesn't cover auto repair) she cannot access until she either leaves the company or turns 59 1/2!:confused:
From what the guy said this is a recent change in the companies policy that took affect last year!

That's the way my plan is. I CAN take a loan of up to 50% of the value of the fund.

But I can't pull the money out entirely until I turn 59 1/2 or leave the company. At which point I have to pay taxes and penalties.

If I take a loan, I have to pay myself interest unless it is to buy a primary residence or pay medical expenses which would otherwise bankrupt me.

If you're mad now, wait until the government confiscates your 401k. :D

PaPa Johns 77
Mar 2nd, 10, 7:46 PM
That's the way my plan is. I CAN take a loan of up to 50% of the value of the fund.

But I can't pull the money out entirely until I turn 59 1/2 or leave the company. At which point I have to pay taxes and penalties.

If I take a loan, I have to pay myself interest unless it is to buy a primary residence or pay medical expenses which would otherwise bankrupt me.

If you're mad now, wait until the government confiscates your 401k. :D

I hear that!:mad:

EdCarpenter
Mar 2nd, 10, 8:21 PM
Too bad the GOV didn't have to follow similar rules when raiding Social Security.

jpete
Mar 2nd, 10, 8:26 PM
Not trying to piss anybody off, but they are called "retirement plans" for a reason. Just my 2 cents.

No question, but if you starve to death before you retire, what's the point?

oktunes
Mar 2nd, 10, 8:57 PM
401's and IRA's were never designed to allow easy access to the money. If it was easy to get the money out most people would raid them way before retirement and then when they needed it there wouldn't be anything left. If you want to save but have easy access, you should just buy mutual funds and not put the money in a retirement vehicle.

The individual rules are up to the sponsoring company and usually medical is about the only way to get the money out. Most do allow you to borrow from them. You do have to pay interest, but you are paying it to yourself and not a bank.

If your company does any kind of matching funds, it is still smart to invest the maximum they match. If you have no matching funds, an IRA would make better sense then a 401.

Cameano
Mar 3rd, 10, 1:45 AM
That's the way my plan is. I CAN take a loan of up to 50% of the value of the fund.

But I can't pull the money out entirely until I turn 59 1/2 or leave the company. At which point I have to pay taxes and penalties.

If I take a loan, I have to pay myself interest unless it is to buy a primary residence or pay medical expenses which would otherwise bankrupt me.


That's how mine's set up. I've been toying with the idea of taking a loan so I can finish my El Camino up this year. It needs to be done before I move back to the mainland in a couple of years. ;)

ZZ69chevelle
Mar 3rd, 10, 3:24 AM
Too bad the GOV didn't have to follow similar rules when raiding Social Security.

The government funds today's retirees with current workers. Let a company try that with a private pension plan, and someone would be looking out of some nice prison bars.

oktunes
Mar 3rd, 10, 7:43 AM
Last night on NBC news, it was stated that the only retirement fund paid completely in advance is the Post Office. I don't think many pension plans have the required money in advance. Most IRA's and 401's do. Usually you can close the accounts and take the money anytime you want, but you will pay 10% penalty plus income tax.

Xtreme70SS396
Mar 3rd, 10, 10:03 AM
You "should" never take a loan on your 401k unless it really is a severe hardship. Common mistake to make with long-term funds, I'll explain why in a bit.

You can take your 401k money and move it into an IRA if you want it out. You may lose any vesting money, though - but depending on the plan and how long it takes to vest any company contributions, you can move it as soon as vested or move your contributions at any time.

You don't pay a penalty on 401k loans unless you don't pay it back.

Now, back to the loan argument.

You put money into the 401k tax-free. Let's say $100.
You take money out to buy a car. Let's say $50 (it's a Ford)
When you pay the $50 back, it's AFTER TAX, plus INTEREST, AFTER TAX.

The average tax rate is probably 15% - 18% for most people for Federal, plus another 2-3% for state. Let's say 20% combined for the sake of argument.

On top of that 20%, you're also paying interest back to "yourself" - let's say 5% right now (what our plan is). So - you're effectively paying 25% on that loan you made to yourself. It's a HECK of a lot more than you were thinking, and more than you'd pay for a car loan, isn't it?

That tax money could have been in the market working for you in the meantime. Now it's just wasted.

Not done yet, either. You've just paid back, AFTER TAX, 50% of the value of your 401k. The whole point of the 401k is to invest tax-free, then pay tax when you're retired and presumably at a reduced tax rate. You've just lost that with half your 401k.

Now you go to take that 401k money out. You get taxed on it AGAIN, because the laws don't figure in your loan - it's as if you've never paid taxes on that $50 you took out in the government's eyes, they only look at your original contribution. So now you're retired, at a reduced (say 8% tax rate + 2% state) tax rate of 10%. Now that loan, in the long run, has cost you 35% for the funds you took out - not counting gains (or losses) from keeping it invested.

Oh, yeah - if you get laid off or quit your job with that loan outstanding, you have to pay it back immediately or face the 10% early withdrawal penalty, too.

Bottom line, do NOT take out a 401k Loan unless you really, really, really need it!!!!


-hope that made sense....

Cameano
Mar 3rd, 10, 11:26 AM
Now, back to the loan argument.




While your argument does have some merit, I've never had a bank loan that I could pay back pre-tax. :noway: ;)

Andy69
Mar 3rd, 10, 11:42 AM
I'll try not to make this political and so get it moved to CE, because I think this is something important that people need to know about.

I'm not sure if this is related to the OP, but I'll bet it is.

The Treasury and Labor Departments are eyeing your 401k. Seems they are kicking around taking them over. This is being done probably so the government can raid them to cover their huge deficits, just like they have raided Social Security.

This might be just a first step - making it harder to get your money out.

BusinessWeek reports that the Treasury and Labor departments are asking for public comment on "the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams."

In plain English, the idea is for the government to take your retirement savings in return for a promise to pay you some monthly benefit in your retirement years.

http://www.investors.com/NewsAndAnalysis/Article.aspx?id=521423

jpete
Mar 3rd, 10, 11:55 AM
Frankly, I haven't been able to contribute to my 401k in a while. They aren't going to get much out of me! :)

Gene McGill
Mar 3rd, 10, 12:06 PM
While your argument does have some merit, I've never had a bank loan that I could pay back pre-tax. :noway: ;)

I agree. It's not a good arguement when you can apply the same standards to any other kind of loan you are repaying (unless you can some how deduct it, like morgage interest). And paying yourself interest isn't a bad thing, either; better than paying it to a bank. The only real downsides to 401K loans is that your loan balance is not growing at the same rate as your remaining 401K, as that money is out of the market, plus if you lose your job with an outstanding loan and can't pay it off within a certain timeframe (90 days?), the balance is treated as an early withdraw and penalized (10% + taxes) accordingly.

Xtreme70SS396
Mar 3rd, 10, 1:22 PM
I agree. It's not a good arguement when you can apply the same standards to any other kind of loan you are repaying (unless you can some how deduct it, like morgage interest). And paying yourself interest isn't a bad thing, either; better than paying it to a bank. The only real downsides to 401K loans is that your loan balance is not growing at the same rate as your remaining 401K, as that money is out of the market, plus if you lose your job with an outstanding loan and can't pay it off within a certain timeframe (90 days?), the balance is treated as an early withdraw and penalized (10% + taxes) accordingly.

You're being taxed on your 401k loan payback TWICE.

So even though your regular loan is paid back after tax also... it's not taxed AGAIN when you take the money out of your 401k during retirement.

67SS138
Mar 3rd, 10, 1:29 PM
You "should" never take a loan on your 401k unless it really is a severe hardship. Common mistake to make with long-term funds, I'll explain why in a bit.

You can take your 401k money and move it into an IRA if you want it out. You may lose any vesting money, though - but depending on the plan and how long it takes to vest any company contributions, you can move it as soon as vested or move your contributions at any time.

You don't pay a penalty on 401k loans unless you don't pay it back.

Now, back to the loan argument.

You put money into the 401k tax-free. Let's say $100.
You take money out to buy a car. Let's say $50 (it's a Ford)
When you pay the $50 back, it's AFTER TAX, plus INTEREST, AFTER TAX.

The average tax rate is probably 15% - 18% for most people for Federal, plus another 2-3% for state. Let's say 20% combined for the sake of argument.

On top of that 20%, you're also paying interest back to "yourself" - let's say 5% right now (what our plan is). So - you're effectively paying 25% on that loan you made to yourself. It's a HECK of a lot more than you were thinking, and more than you'd pay for a car loan, isn't it?

That tax money could have been in the market working for you in the meantime. Now it's just wasted.

Not done yet, either. You've just paid back, AFTER TAX, 50% of the value of your 401k. The whole point of the 401k is to invest tax-free, then pay tax when you're retired and presumably at a reduced tax rate. You've just lost that with half your 401k.

Now you go to take that 401k money out. You get taxed on it AGAIN, because the laws don't figure in your loan - it's as if you've never paid taxes on that $50 you took out in the government's eyes, they only look at your original contribution. So now you're retired, at a reduced (say 8% tax rate + 2% state) tax rate of 10%. Now that loan, in the long run, has cost you 35% for the funds you took out - not counting gains (or losses) from keeping it invested.

Oh, yeah - if you get laid off or quit your job with that loan outstanding, you have to pay it back immediately or face the 10% early withdrawal penalty, too.

Bottom line, do NOT take out a 401k Loan unless you really, really, really need it!!!!


-hope that made sense....

Not to add fuel to the fire,but...
lets say you have $100 k in your 401k and take a $5k loan at 10% interest,
payback over 3 years. Market tanks before you took loan,401 k worth now $80k.But you took loan and bought a project Chevelle.. You are now money ahead. You have a Chevelle you can touch ,feel and see and you lost $20 k
in your 401k. Now you end up paying back your loan and buying back into the market at lower prices.Now your loan looks damn good. Just saying that
market timing,loan size, and return of investment all play a role on how you manage this particular option that is available to some in their 401k:yes:.

Gene McGill
Mar 3rd, 10, 1:59 PM
You're being taxed on your 401k loan payback TWICE.

So even though your regular loan is paid back after tax also... it's not taxed AGAIN when you take the money out of your 401k during retirement.

It's irrevelent, though. Everything being equal, how is it worse than getting a bank loan, with repect to taxes?

Scenario 1
I have $100 in 401K
I borrow $50 @ 5% from 401K
I pay back $52.5 to 401K from taxed money.
I now have 102.5 in 401k
When I turn 59.5 I start drawing from it and paying taxes on it.

Scenario 2
I have $100 in 401K
I borrow $50 @5% from bank
I pay back $52.5 to bank from taxed money
I still have $100 in 401K
When I turn 59.5 I start drawing from it and paying taxes on it.

Where is the disadvantage from the 401K loan vs. bank?

Andy69
Mar 3rd, 10, 2:01 PM
Not to add fuel to the fire,but...
lets say you have $100 k in your 401k and take a $5k loan at 10% interest,
payback over 3 years. Market tanks before you took loan,401 k worth now $80k.But you took loan and bought a project Chevelle.. You are now money ahead. You have a Chevelle you can touch ,feel and see and you lost $20 k
in your 401k. Now you end up paying back your loan and buying back into the market at lower prices.Now your loan looks damn good. Just saying that
market timing,loan size, and return of investment all play a role on how you manage this particular option that is available to some in their 401k:yes:.

Yeah but timing the market is foolish and almost always fails. To see the benefit, you don't just have to be right once, but at least twice.

ABAD72
Mar 3rd, 10, 2:24 PM
Most people need to listen to Dave Ramsey , and not even save for retirement , untill yer damn house is paid off, and you have no debt..

Most peoplr r puttin money in a 401k getiin 3 % and payin on a house at 6% per month..

Do the math that way,, pay yer house off early ,, save yerslef a LOT OF MONEY .. Then put what you would have been payin in the house payment in yer retirment.. You will catch up what yadidnt put in earlier very quickly..

Georgia69
Mar 3rd, 10, 3:00 PM
ABAD, that math only works if your employer is not matching your contributions.

Xtreme70SS396
Mar 3rd, 10, 3:24 PM
It's irrevelent, though. Everything being equal, how is it worse than getting a bank loan, with repect to taxes?

Scenario 1
I have $100 in 401K
I borrow $50 @ 5% from 401K
I pay back $52.5 to 401K from taxed money.
I now have 102.5 in 401k 50k untaxed/52.5k taxed
When I turn 59.5 I start drawing from it and paying taxes on it.

Gov't share, assuming an easy 10% tax rate on Scenario 1: 52.5k@10% = 5.25k
+102.5k@10% = 10.25k Total paid to Gov't = $15.5k

Scenario 2
I have $100 in 401K
I borrow $50 @5% from bank
I pay back $52.5 to bank from taxed money
I still have $100 in 401K 100k untaxed
When I turn 59.5 I start drawing from it and paying taxes on it.

Gov't share, assuming an easy 10% tax rate on Scenario 2: 100k@10% = 10k + 52.5k@10% (regular earnings to pay back loan) = 5.25k Total paid to Gov't = $15.25k

Where is the disadvantage from the 401K loan vs. bank?
Difference = .25k (tax rate on the tax paid for earnings that went into the 401k payback)

I see the logic in your argument, and the flaw(s) in mine - but from a pure 401k perspective, you will get taxed twice on it. The real difference is a lot smaller than I was thinking because it would only be the tax % that is duplicated, not the full loan amount. Plus you could always argue that money left in the 401k will make additional earnings that will also be taxed.... :sad:

Personally, I like the invest in the chevelle arrangement the best. :D

Mark66SS
Mar 3rd, 10, 3:27 PM
Most people need to listen to Dave Ramsey , and not even save for retirement , untill yer damn house is paid off, and you have no debt..

Most peoplr r puttin money in a 401k getiin 3 % and payin on a house at 6% per month..

Do the math that way,, pay yer house off early ,, save yerslef a LOT OF MONEY .. Then put what you would have been payin in the house payment in yer retirment.. You will catch up what yadidnt put in earlier very quickly..


I believe my wife gets a match from the employer of up to 8% of her salary . So its a 100% return on her investment

Gene McGill
Mar 3rd, 10, 4:55 PM
I see the logic in your argument, and the flaw(s) in mine - but from a pure 401k perspective, you will get taxed twice on it. The real difference is a lot smaller than I was thinking because it would only be the tax % that is duplicated, not the full loan amount. Plus you could always argue that money left in the 401k will make additional earnings that will also be taxed.... :sad:

Personally, I like the invest in the chevelle arrangement the best. :D

Make it simpler:

Take out $50 in a 401K loan. No taxes are paid on the money recieved from loan. Pay back the loan using that same tax-free $50. Out of pocket taxed money would be the 5% interest. So technically, you can say you added $2.50 to your 401K that will be taxed twice, or that any interest paid on a 401K loan is taxed twice. Otherwise, unless you can somehow show that you are paying tax on the original loan, you are not paying double taxes on the loan. Now if you had to pay taxes on the loan, then you'd be right.

Even with the interst being double taxed, you're still better off paying it to yourself, than to a bank. $2.5 that has been taxed twice is better than nothing.

webfoot
Mar 3rd, 10, 5:16 PM
Gene, you sound like you have a lot of experience in this area. I have been working for a pension/profit sharing TPA for 10 years.

Gene McGill
Mar 3rd, 10, 7:23 PM
Gene, you sound like you have a lot of experience in this area. I have been working for a pension/profit sharing TPA for 10 years.

No, I've just taken out a few 401K loans in my lifetime. (I had to look up TPA to see what it meant ;))

mr 4 speed
Mar 3rd, 10, 7:42 PM
I cashed one of my 401K's out almost 3 years ago and bought a little gold
Wish I cashed them all out :mad:

gasoline_fiend
Mar 3rd, 10, 8:21 PM
Most people need to listen to Dave Ramsey , and not even save for retirement , untill yer damn house is paid off, and you have no debt..

Most peoplr r puttin money in a 401k getiin 3 % and payin on a house at 6% per month..

Do the math that way,, pay yer house off early ,, save yerslef a LOT OF MONEY .. Then put what you would have been payin in the house payment in yer retirment.. You will catch up what yadidnt put in earlier very quickly..


Maybe no mortgage payment, but theres always that ulgy thing called property taxes. The gov will always find a way to get into your wallet, even if you pay off your loans.:mad:

Unclepennybags
Mar 4th, 10, 7:59 AM
If you're mad now, wait until the government confiscates your 401k. :D

Or starts "means testing" Social Security! In other words, if your assets exceed a certain amount, you won't get Social Security when you retire. And yes, it is being discussed currently. Of course, it will be aimed at the "rich" as it's introduced to the American public.

Mike

sunbakd1
Mar 4th, 10, 9:53 AM
401k is not an ATM. It looks like the plan is protecting people from themselves.These are hard times. The TPA should make some small exception for folks given the current economic circumstances.

Amend the plan to allow small loans to help people that are already in a bad situation. That is what Hardship Withdrawals are all about.

Merrill probably wanted to stop the bleeding of EXODUS of money leaving the plan.

jpete
Mar 4th, 10, 10:38 AM
401k is not an ATM. It looks like the plan is protecting people from themselves.These are hard times. The TPA should make some small exception for folks given the current economic circumstances.

Amend the plan to allow small loans to help people that are already in a bad situation. That is what Hardship Withdrawals are all about.

Merrill probably wanted to stop the bleeding of EXODUS of money leaving the plan.

Not my problem if Merril, etc don't have enough money to cover my withdrawl. While I understand a 401k isn't an ATM, the fact remains if you become homeless and starve to death before retirement, the fund isn't much use.

PaPa Johns 77
Mar 4th, 10, 11:47 AM
401k is not an ATM. It looks like the plan is protecting people from themselves.These are hard times. The TPA should make some small exception for folks given the current economic circumstances.

Amend the plan to allow small loans to help people that are already in a bad situation. That is what Hardship Withdrawals are all about.

Merrill probably wanted to stop the bleeding of EXODUS of money leaving the plan.

I look at it like this it IS your money, not theirs and they will hit you 10% for taking it out. But now they have devised ways to keep people from accessing their own money because they want to keep making their big profits and getting those multi million dollar bonuses while everyone else gets peanuts on their account!

69 Daytona Yellow 3 Speed
Mar 4th, 10, 12:48 PM
Maybe no mortgage payment, but theres always that ulgy thing called property taxes. The gov will always find a way to get into your wallet, even if you pay off your loans.:mad:

You got that right ! In 20 years my property taxes are 4.5 times as much as back then. Makes me sick. Wages have not gone up that much. Phuck em i say ! Hard any way you can !

32767chvl
Mar 4th, 10, 1:38 PM
Merrill probably wanted to stop the bleeding of EXODUS of money leaving the plan.
Not my problem if Merril, etc don't have enough money to cover my withdrawl. While I understand a 401k isn't an ATM, the fact remains if you become homeless and starve to death before retirement, the fund isn't much use.This is the plan adminstrator's issue, not Merrill's--Merrill is the directed recordkeeper. They set the plan up according to how the client (Walmart) indicated based on what guidelines the plan has to work with related to a defined contribution plan--And even then both parties are restricted to what's defined by ERISA.

I look at it like this it IS your money, not theirs and they will hit you 10% for taking it out. But now they have devised ways to keep people from accessing their own money because they want to keep making their big profits and getting those multi million dollar bonuses while everyone else gets peanuts on their account!Who is "they" that you're blaming here? Neither Walmart nor Merrill Lynch have latitude to send you a check when the 401a Internal Revenue Code stipulates that the only provisions for taking money out of a defined contribution 401k plan are a loan, a hardship withdrawal, (Must be approved by the plan adminstrator) a 59.5 age withdrawal, termination, retirement, or death. If they did and the IRS and DOL found out about it, the whole plan would be disqualified. No one has "devised" any ways to keep people from getting their money--It's the way these plans were designed since 1974.

jpete
Mar 4th, 10, 1:48 PM
"They" is the IRS. I understand it's not they company's fault, it's the government. As usual.

PaPa Johns 77
Mar 4th, 10, 2:34 PM
This is the plan adminstrator's issue, not Merrill's--Merrill is the directed recordkeeper. They set the plan up according to how the client (Walmart) indicated based on what guidelines the plan has to work with related to a defined contribution plan--And even then both parties are restricted to what's defined by ERISA.

Who is "they" that you're blaming here? Neither Walmart nor Merrill Lynch have latitude to send you a check when the 401a Internal Revenue Code stipulates that the only provisions for taking money out of a defined contribution 401k plan are a loan, a hardship withdrawal, (Must be approved by the plan adminstrator) a 59.5 age withdrawal, termination, retirement, or death. If they did and the IRS and DOL found out about it, the whole plan would be disqualified. No one has "devised" any ways to keep people from getting their money--It's the way these plans were designed since 1974.

I think you need to go back and do your homework again.
The government says the only way you can get out of paying about 20% in taxes on a withdrawal of funds is a hardship withdrawal.
The rest is what ever type of deal the compant and the financial institution worked out.

Georgia69
Mar 4th, 10, 3:02 PM
My wifes is the same way....I wish i could of pulled it out before the crash.

If you had pulled it out, you would have paid 25% - 30% in state and federal taxes, and another 10% IRS penalty, all of which exceeds the amount lost in the crash. And the market has largely come back since the crash.

32767chvl
Mar 4th, 10, 3:02 PM
I think you need to go back and do your homework again.
The government says the only way you can get out of paying about 20% in taxes on a withdrawal of funds is a hardship withdrawal.
The rest is what ever type of deal the compant and the financial institution worked out.No, I don't--I've been in this business for 14 years. You can't take your money out of a 401k plan "because you feel like it". There has to be a distributable event.
And neither the company nor the financial institution imposes either the 20% FEDERAL TAXES, nor the 10% early withdrawal penalty. (Also paid to the IRS)
FYI--some states also impose a 401k tax.

http://www.irs.gov/retirement/participant/article/0,,id=151787,00.html

MarkM
Mar 4th, 10, 4:19 PM
Maybe no mortgage payment, but theres always that ulgy thing called property taxes. The gov will always find a way to get into your wallet, even if you pay off your loans.:mad:

Yeah, but you have to pay those regardless if you have your house paid off or not.

Might as well get out from under that house intrest.

But most are getting more on thier retirement return then what their home mortgage interest is.

Beaux
Mar 4th, 10, 4:23 PM
I access my 401K daily. Its parked in the garage, in pieces....but I can get to it whenever I want to and no penalties other than depression.

Mark66SS
Mar 4th, 10, 4:25 PM
No, I don't--I've been in this business for 14 years. You can't take your money out of a 401k plan "because you feel like it". There has to be a distributable event.
And neither the company nor the financial institution imposes either the 20% FEDERAL TAXES, nor the 10% early withdrawal penalty. (Also paid to the IRS)
FYI--some states also impose a 401k tax.

http://www.irs.gov/retirement/participant/article/0,,id=151787,00.html

I think what PaPA was getting to is the the IRS sets up the tax and penalty for talking money out without a distributable event. Whereas the the company and the fund set up if you can take a loan on it

LJM
Mar 4th, 10, 5:31 PM
The company i work for just closed down the 401K account. I have the option to rollover into an IRA or pay the 40% and keep the difference. (30% tax 10% penalty)

I would love to buy another toy but i'm going to rollover the money.

ChevelleFan70
Mar 4th, 10, 6:09 PM
I think there are some here who don't really understand how a 401k works and what it is designed to do. It's designed to be difficult to get your money out (before 59.5). You should know that up-front. As another poster said, it's for retirement savings.

There's another option, called a Roth IRA. After-tax dollars are contributed, but you can always take out, without penalty, the amount you've contributed. Say over 10 years, you've put $50k in your Roth IRA. Maybe the account value after those 10 years is $100k because you made good investment choices. You can still remove up to $50k without any taxes or penalties at all, at any time. Maybe this is the kind account the OP would really prefer to have. (or thought he had). I'm pretty sure I'm right about this, but I'll let the CPAs and finance types correct me if I'm wrong.

-Dave

GenPac
Mar 4th, 10, 6:19 PM
The company i work for just closed down the 401K account. I have the option to rollover into an IRA or pay the 40% and keep the difference. (30% tax 10% penalty)

I would love to buy another toy but i'm going to rollover the money.

You pay 30% taxes? Are you a single, renter, no children, no investments?
I don't believe a disbursement from a 401k is subject to capital gains tax, it just counts as income for the disbursement year, IIRC.

oktunes
Mar 4th, 10, 8:38 PM
Early withdrawls should pay straight income tax, between 15% and 18% for most people and another 10% penalty. As stated several times, these are retirement accounts and are designed to be used for that, not for any kind savings for normal living expenses until you retire.

If you have any kinds of matching funds where you work, it is a real mistake to not take advantage of a 401. The IRA is just as good if you have no 401 at work. If you can do both, it is even better.

I am 59, did both and had a company profit sharing plan. All of it together allowed me to retire pretty young. All you young guys that aren't thinking about retirement now are making a big mistake. If you can start anything when you are in your 20's and add to it on a regular basis, maybe increase it as you get older, you will be able to retire. If you think Social Security will be your retirement, you will live in poverty. Not that SS won't be there, but it doesn't pay nearly enough to live on. A good retirement takes advantage of years in the market, not months.

LJM
Mar 4th, 10, 11:03 PM
You pay 30% taxes? Are you a single, renter, no children, no investments?
I don't believe a disbursement from a 401k is subject to capital gains tax, it just counts as income for the disbursement year, IIRC.

Yes i am single, no kids and renter right now. I'm under contact to buy a house and the closing is (3) weeks away. I owned a condo for ten years sold it a few years back. I have a few roth IRA's right now.

The company i work for has decided to close the 401K account, they have "Never" contributed any funds to the account it was just there for the workers to save there own money.

I will rollover the money into another account but if i did cash it out i would have to pay close to 40% of the money after you factor in the fed and Ct. state taxes, penalty and my income. I've already met with an accountant and it came out to 39%

64elkynss
Mar 5th, 10, 8:16 PM
My 401k plan allows us to take loans against our 401k for up to 50% of the acct. total for purchasing a home or going back to school for a degree. 64elkynss

Randy Mosier
Mar 12th, 10, 8:14 PM
Not trying to piss anybody off, but they are called "retirement plans" for a reason. Just my 2 cents.

That is a joke. They were originally conceived as tax shelters for the wealthy under the guise of "retirement plans". A lot of people who put their trust in their 401k plans are finding out that their trust was misplaced.

oktunes
Mar 12th, 10, 9:32 PM
An IRA and especially a 401K is available to anybody that works for any amount of money they want to put into it. It is in no way for the rich as a tax shelter. A traditional IRA has as much tax advantage for a guy making $28,000 a year as it does for a guy making $500,000. The tax credit is max $2,000, no more, no less. You could put $10,000 in and still only get the same tax benefit as a guy making $28,000 gets with a $2,000 contribution. Your 401 contribution is a percent of your wages and is not subject to income tax. Doesn't matter how much you make, it is a percent, the same for everyone.

slackdaddy
Mar 12th, 10, 10:16 PM
There is no such thing as paying yourself interest. If you have 10,000 in a 401 and 1,000 in a savings account and borrow the 10,000 at 10%, you pay it back with the 1,000 in your savings acount and now you have 11,000 in your 401. If you leave it alone and it draws 10% you now have 12,000. The original 10,000, your 1,000 in savings and the 1,000 that it earned from outside sources.

The so called paying yourself interest is from money that is already yours.

Most people do also pay close to 30% percent tax. The 15-18% tax rate mentioned is the federal rate only. you also have to add state and local taxes to that. Me in KY. adds 7.5 state, 1% local for living in the city and 1% city for working in the city for a total of 25.5%