Comments on: Should You Cash Out Your 401(k) When Leaving a Job? http://www.moneyunder30.com/should-you-cash-out-your-401k-when-leaving-a-job Simple, Honest Financial Advice Thu, 09 Feb 2012 22:53:06 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Vickie http://www.moneyunder30.com/should-you-cash-out-your-401k-when-leaving-a-job/comment-page-1#comment-13054 Vickie Wed, 02 Nov 2011 12:26:14 +0000 http://www.moneyunder30.com/?p=555#comment-13054 I have been reading and researching a lot about 401K and it still seems like we don't have many choices. We live very frugally already. We don't buy any of the electronics, tv's, 'toys' that a lot of people buy. We hardley ever go out to eat. We make our meals from scratch, garden, barter, on and on. Every site I go to on how to save money, we are already doing it. We were doing ok and paying all our bills with nothing left over when my husbands job cut everyone's pay by 10%. It is huge for us. There really is no future there for him. He will never get a promotion and they keep people on forever even though there are alcohol and drug problems and falling asleep at their desk. Anyway, my husbands brother asked him to start working for him in his business where he makes annually about 150,000 or more. It would be a risk for us of course and in the past we have turned him down. But now we are thinking this may be a good time. Our situation is this though, we have about 13,000 in credit card bills. (car repairs, kids in college....really no frivolous spending) and we have a mortgage that we have never been late on. We have not been contributing to my husbands 401K for 4 years now. It also keeps loosing money. We have a couple of options as I see it. We can file bankruptcy and start anew, and ruin our credit. He could quit his job and work for his brother and try and build up a better income. He makes about 40,000 now, I make about 600 a month. (We have 3 kids at home and two in college, working full time is not an option.) If he quit his job, there would be less income at first. We were thinking if we took this option we could cash out the 401K which is about 42,000 right now. Pay off the credit cards, put a down payment on the mortgage for a refinance to get the monthly down (right now 850 per month) and pay off the car which only has 3000 left on it. That way we could live on even less, while he is getting the business started. We know it is risky with the retirement. We are 48 and 44 right now. But if he can go from 40,000 to at least 80,000 in a few years is that a good idea? In his current job there would be no increase in pay and our bills would only get higher. We really feel trapped right now to have about 350.00 taking off his paycheck starting at the end of Nov. Could you give some advice? I have been reading and researching a lot about 401K and it still seems like we don’t have many choices. We live very frugally already. We don’t buy any of the electronics, tv’s, ‘toys’ that a lot of people buy. We hardley ever go out to eat. We make our meals from scratch, garden, barter, on and on. Every site I go to on how to save money, we are already doing it. We were doing ok and paying all our bills with nothing left over when my husbands job cut everyone’s pay by 10%. It is huge for us. There really is no future there for him. He will never get a promotion and they keep people on forever even though there are alcohol and drug problems and falling asleep at their desk. Anyway, my husbands brother asked him to start working for him in his business where he makes annually about 150,000 or more. It would be a risk for us of course and in the past we have turned him down. But now we are thinking this may be a good time. Our situation is this though, we have about 13,000 in credit card bills. (car repairs, kids in college….really no frivolous spending) and we have a mortgage that we have never been late on. We have not been contributing to my husbands 401K for 4 years now. It also keeps loosing money. We have a couple of options as I see it. We can file bankruptcy and start anew, and ruin our credit. He could quit his job and work for his brother and try and build up a better income. He makes about 40,000 now, I make about 600 a month. (We have 3 kids at home and two in college, working full time is not an option.) If he quit his job, there would be less income at first. We were thinking if we took this option we could cash out the 401K which is about 42,000 right now. Pay off the credit cards, put a down payment on the mortgage for a refinance to get the monthly down (right now 850 per month) and pay off the car which only has 3000 left on it. That way we could live on even less, while he is getting the business started. We know it is risky with the retirement. We are 48 and 44 right now. But if he can go from 40,000 to at least 80,000 in a few years is that a good idea? In his current job there would be no increase in pay and our bills would only get higher. We really feel trapped right now to have about 350.00 taking off his paycheck starting at the end of Nov. Could you give some advice?

]]> By: Brandon http://www.moneyunder30.com/should-you-cash-out-your-401k-when-leaving-a-job/comment-page-1#comment-8551 Brandon Wed, 15 Dec 2010 21:08:52 +0000 http://www.moneyunder30.com/?p=555#comment-8551 I only have $1144 in my 401k a previous job, should I cash it out since im short on cash? Please help I only have $1144 in my 401k a previous job, should I cash it out since im short on cash? Please help

]]> By: Janet http://www.moneyunder30.com/should-you-cash-out-your-401k-when-leaving-a-job/comment-page-1#comment-4021 Janet Tue, 29 Dec 2009 06:14:30 +0000 http://www.moneyunder30.com/?p=555#comment-4021 I knew all along what I had to do, but this is just reassurance that the smart thing to do is roll over to an IRA. I am in the mist of buying a second home and thinking of getting into my 401k, however putting less of a down payment may be a better option. I am just an average Joe giving heads up to the individuals that are in the same turmoil. Be ready alert and smart about your choices and investments my friends. :) I knew all along what I had to do, but this is just reassurance that the smart thing to do is roll over to an IRA. I am in the mist of buying a second home and thinking of getting into my 401k, however putting less of a down payment may be a better option. I am just an average Joe giving heads up to the individuals that are in the same turmoil. Be ready alert and smart about your choices and investments my friends. :)

]]> By: David Nelson http://www.moneyunder30.com/should-you-cash-out-your-401k-when-leaving-a-job/comment-page-1#comment-1796 David Nelson Tue, 23 Dec 2008 04:02:35 +0000 http://www.moneyunder30.com/?p=555#comment-1796 Great basic advice! Great basic advice!

]]> By: Money Under 30 http://www.moneyunder30.com/should-you-cash-out-your-401k-when-leaving-a-job/comment-page-1#comment-1795 Money Under 30 Tue, 21 Oct 2008 14:46:33 +0000 http://www.moneyunder30.com/?p=555#comment-1795 That would really suck if you had less than $5000 and your plan forced you to cash out. That happened to me once at a part time job with a Fidelity plan, but the limit was $1000 and I had like $995 in it. Err. Actually I was just rolling over an old 401(k) to an IRA last night and I noticed that the plan (John Hancock) wouldn't let you roll an account of less than $5,000 into one of their own IRAs. That's a crappy move, too. What's even crappier is that the account lost about 40% in value since July, but that's another story :( Finally, I hope that benefits admins and HR folks out there know to counsel people not to cash out. I doubt all do. During exit interviews I've had HR people that have simply stated the options--including the penalties--as if one is no worse than the other. That's one reason that it's not THAT surprising so many people cash out. That would really suck if you had less than $5000 and your plan forced you to cash out. That happened to me once at a part time job with a Fidelity plan, but the limit was $1000 and I had like $995 in it. Err.

Actually I was just rolling over an old 401(k) to an IRA last night and I noticed that the plan (John Hancock) wouldn’t let you roll an account of less than $5,000 into one of their own IRAs. That’s a crappy move, too. What’s even crappier is that the account lost about 40% in value since July, but that’s another story :(

Finally, I hope that benefits admins and HR folks out there know to counsel people not to cash out. I doubt all do. During exit interviews I’ve had HR people that have simply stated the options–including the penalties–as if one is no worse than the other. That’s one reason that it’s not THAT surprising so many people cash out.

]]> By: twenties money http://www.moneyunder30.com/should-you-cash-out-your-401k-when-leaving-a-job/comment-page-1#comment-1794 twenties money Tue, 21 Oct 2008 13:13:49 +0000 http://www.moneyunder30.com/?p=555#comment-1794 yuck, cashing out is a horrible option. However, sometimes it is really pushed. For instance, if you have less than $5,000 in your account you may be forced to cash out. I see people cash out their account a lot and I just have to hang my head in disbelief. Individuals who cash their accounts out will not get to experience the true value of compounding interest over many years. For those of us under 30 my advice is roll it into a new plan, roll it over into an IRA, or just let it stay in the old employers plan. DO NOT cash it out unless you are being forced to do so, and even then read between the lines to make sure you absolutely have to. If you do cash it out, do yourself a favor and don't spend it. Go ahead and put it into an IRA or stocks. yuck, cashing out is a horrible option. However, sometimes it is really pushed. For instance, if you have less than $5,000 in your account you may be forced to cash out.

I see people cash out their account a lot and I just have to hang my head in disbelief. Individuals who cash their accounts out will not get to experience the true value of compounding interest over many years. For those of us under 30 my advice is roll it into a new plan, roll it over into an IRA, or just let it stay in the old employers plan. DO NOT cash it out unless you are being forced to do so, and even then read between the lines to make sure you absolutely have to. If you do cash it out, do yourself a favor and don’t spend it. Go ahead and put it into an IRA or stocks.

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