Taping retirement fund??

[singinjeannie]

Does anyone know the types of fees I'll face if I tap into my retirement fund and how I'll have to pay them?

Will I have to pay them now or at tax time (Apr. 15th?). Will the bank I've invested with automatically withdraw the applicable fees or will I have to have an accountant figure that out?

We have so much unsecured debt, it seems we really have no choice but to get rid of the retirement account to get ourselves closer to a balanced budget.

Any thoughts?

Thanks,
Jean

[terry1156]

Re: Taping retirement fund??

I don't know exactly what your financial position is, but you don't want to tap the retirement fund if at all possible. I would highly suggest you see a financial planner and work out a doable plan with them than trying to do it on your own. They will give you options before you tap into the retirement savings

I'm not postive on this, but I believe that if you do withdraw the money early, you will have a 10% penalty levied on the amount you take out plus your company will hold 20% for Federal taxes.

[Tree0164]

Re: Taping retirement fund??

I used to work with 401k plans- they would take out the 20% mandatory withholding on your withdrawal. You need to sign paperwork stating that you understand that is a mandatory tax withholding. The holding company will send out a 1099r at the end of the year with the amount withdrawn and indicated that is pre 59.5 withdrawal so you will get the 10% IRS penalty. This will most likely also bump you up into another tax bracket. So your $30k may only net you $18k or so after taxes.

You really need to think twice or maybe even 3 times about doing this. Cashing out the 401k is really bad and should only be done in extreme emergencies like your house being forclosed on. As stated in another thread if you cash your 401k, it is only a band-aide. You and your husband need to get on the same page for money. Set up a plan, find a way to earn extra money. My husband and I have paid off more than $22k in debt over the 4 years when we cut up the credit cards. The last 2.5 yr was me only working from home at a part time income. I had a pretty decent 401k built up and could have easily wiped out the debt, but it doesn't cure the problem. We really scrimped so we could get out of debt and allow me to stay home. Luckily, my husband income has gone up (however his income can vary he is in commissioned sales) and my business is steadily growing. If you think that you are in a tough situation, also go read the boards at www.totalmoneymakeover.com and you will see alot of people that are really taking their debt seriously. That is Dave Ramsey boards and he has several books called Financial Peace. I only have a few hundred left on credit cards (no car payments and but a mortgage) and just not having that debt over my head gives me financial peace.