Author Topic: 401K Cash Out  (Read 465 times)

0 Members and 1 Guest are viewing this topic.

Offline ucoc

  • Tourist
  • *
  • Thanks
  • -Given: 1
  • -Received: 0
  • Posts: 18
401K Cash Out
« on: January 04, 2019, 01:43:21 PM »
I briefly asked this in another thread also, but wanted to ask if anyone had cashed out their 401K before you turned 65. My wife quit her job last year and we wanted to cash out for another purpose. If anyone has done this, did you get the money without the tax or did you have to pay the tax the following year? Was the penalty pretty big? Any recommendations or warning before we do this?

Offline mads

  • Tourist
  • *
  • Thanks
  • -Given: 2
  • -Received: 3
  • Posts: 28
Re: 401K Cash Out
« Reply #1 on: January 06, 2019, 02:24:47 PM »
Hi, we had withdrawn from our IRA when we purchased our home. We were able to pay the amount back into the IRA within the 60 day rollover. so there will be no back taxes or penalties to be paid for the 2018 tax return. The 60 day rollover rule is: if you withdraw money from your IRA or 401k , you have 60 days to put the exact amount back in a retirement account. If you are not able to do so, the money you withdrew is considered as income for that year. In addition, you need to pay a 10% penalty. You can do the 60 day rollover once every 12 months. Hope this helps.

Offline ucoc

  • Tourist
  • *
  • Thanks
  • -Given: 1
  • -Received: 0
  • Posts: 18
Re: 401K Cash Out
« Reply #2 on: January 07, 2019, 01:10:28 PM »
Hi, we had withdrawn from our IRA when we purchased our home. We were able to pay the amount back into the IRA within the 60 day rollover. so there will be no back taxes or penalties to be paid for the 2018 tax return. The 60 day rollover rule is: if you withdraw money from your IRA or 401k , you have 60 days to put the exact amount back in a retirement account. If you are not able to do so, the money you withdrew is considered as income for that year. In addition, you need to pay a 10% penalty. You can do the 60 day rollover once every 12 months. Hope this helps.

Thanks for the response. I guess not many people have dealt with this. I guess it could be just simple cash out and pay the penalty and taxes. The 60 day rollover rule is very helpful to know though. Thanks again!

Offline Liar Loan

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 488
  • -Received: 316
  • Posts: 1672
Re: 401K Cash Out
« Reply #3 on: February 04, 2019, 10:05:24 AM »
Hi, we had withdrawn from our IRA when we purchased our home. We were able to pay the amount back into the IRA within the 60 day rollover. so there will be no back taxes or penalties to be paid for the 2018 tax return. The 60 day rollover rule is: if you withdraw money from your IRA or 401k , you have 60 days to put the exact amount back in a retirement account. If you are not able to do so, the money you withdrew is considered as income for that year. In addition, you need to pay a 10% penalty. You can do the 60 day rollover once every 12 months. Hope this helps.

Thanks for the response. I guess not many people have dealt with this. I guess it could be just simple cash out and pay the penalty and taxes. The 60 day rollover rule is very helpful to know though. Thanks again!

It's not advisable because you are likely to pay 43% or more, to the government. (24% Fed + 10% penalty + 9% State)  This is to quote Dave Ramsey now, but would you borrow money at a 43% interest rate?  That is effectively what you are doing here. 

So following that logic, it would be smarter to max out your highest APR credit card than to withdraw that money.  It would be smarter to get a payday loan, or a loan from Vinny the local loan shark, than to do what your wife is planning to do.

I'm not saying this is ideal either, but maybe your wife should first think about getting a 401k loan over withdrawing the money outright and paying that huge tax bill.
eyephone:  Your the snowflake lil bitch. Making up fake stories.

The following member(s) thanked this post:


 

Talk Irvine Links

[Recent Posts]
[FAQ / Rules]

Site Supporters


Related Links

Recent Posts