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hAve you taken money out of your 401k?
What was your experience?
Is it as bad as everyone says? I have about 10k in there and am looking to take out 2k. It's not a hardship, but for another reason...not something frivolous, either.
Rather hear from real people versus online articles.
Message edited 7/10/2012 10:45:05 AM.
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Posted 7/10/12 10:44 AM  |
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Long Island Weddings
Long Island's Largest Bridal Resource |
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Re: hAve you taken money out of your 401k?
I think you should talk to your financial advisor or your accountant. They will give you exact numbers.
I would rather do a HELOC, personal loan, or line of credit.
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| Posted 7/10/12 10:49 AM |
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dctead
It's 5 o'clock somewhere!
Member since 11/10 2139 total posts
Name:
Emily
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hAve you taken money out of your 401k?
I did take out about 1500 from my 401k last year. I was able to do it as a Loan with the payments taken from my check (interest at that time was 4%)... there wasn't any penalty as it was done as a loan. Not sure if every company can do that.. but it worked easily for me.
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| Posted 7/10/12 10:55 AM |
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DRMom
Two in Blue
Member since 5/05 20223 total posts
Name:
Melissa
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Re: hAve you taken money out of your 401k?
I depleted an old 401K I had to pay for my IVF. I had twins and never regretted it for a second.
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| Posted 7/10/12 10:57 AM |
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jilliibabii
Mrs. O'Connor
Member since 6/10 12821 total posts
Name:
Jillian
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Re: hAve you taken money out of your 401k?
I borrowed against myself for the final payment of our RH at our wedding. I made sure I paid it back within two months of the wedding and it worked out really well. I'd definitely do it again if I had to.
ETA: There was no penalty for mine either, but I can't remember the interest rate. It was minimal though and like I said, I paid it all back right away.
Message edited 7/10/2012 11:08:24 AM.
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| Posted 7/10/12 11:07 AM |
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StaceyWill
It's a girl!!!
Member since 6/10 21539 total posts
Name:
Stacey
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Re: hAve you taken money out of your 401k?
Posted by dctead
I did take out about 1500 from my 401k last year. I was able to do it as a Loan with the payments taken from my check (interest at that time was 4%)... there wasn't any penalty as it was done as a loan. Not sure if every company can do that.. but it worked easily for me.
Same for me...I was able to take a 2k loan out. Not sure of the exact interest rate, but it was pretty low.
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| Posted 7/10/12 11:15 AM |
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Hofstra26
Love to Bake!
Member since 7/06 27915 total posts
Name:
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Re: hAve you taken money out of your 401k?
We took money from DH's 401K and it wasn't bad at all because we took it out as a loan against ourselves which you're allowed to do with NO penalties. The only thing is, you have to start paying yourself back right away (it's SUPER low interest rate, I think ours is less than 3%). The loan payback amount comes right out of DH's paycheck every week and goes back into his 401K.
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| Posted 7/10/12 11:22 AM |
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b2b777
LIF Adult
Member since 9/09 4474 total posts
Name:
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Re: hAve you taken money out of your 401k?
and the interest you pay 2-4% is actually put right into your fund, so it isnt like you are paying a bank the interest. you are paying the interest to yourself!
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| Posted 7/10/12 11:40 AM |
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Re: hAve you taken money out of your 401k?
My dad always says to take a loan out because then you are paying yourself back, instead of taking the money out.
DH is in Local 3 which gets paid holidays and furlough checks come out of your 401K. We didn't realize it at the time but we got hit with a 10% penalty and it KILLED us at tax season. We are going to start taking my dad's advice and stop those checks and just take a loan out at the beginning of the year to cover the 12 weeks furlough and the 11 holidays.
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| Posted 7/10/12 12:55 PM |
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Hope2009
Thankful
Member since 1/09 4429 total posts
Name:
A
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Re: hAve you taken money out of your 401k?
Posted by b2b777
and the interest you pay 2-4% is actually put right into your fund, so it isnt like you are paying a bank the interest. you are paying the interest to yourself!
exactly. I did this too, the interest is minimal.
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| Posted 7/10/12 1:00 PM |
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LMFitz
life is good
Member since 5/05 2013 total posts
Name:
L
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Re: hAve you taken money out of your 401k?
I borrowed from it twice. Once for my down payment for our wedding, and once for our down payment for our house. No regrets....
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| Posted 7/10/12 1:43 PM |
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LoveMyHubby605
Our April Baby is here!
Member since 4/11 2418 total posts
Name:
A
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Re: hAve you taken money out of your 401k?
I've borrowed 5000 and like PP said, there reallly isn't a penalty per se since you are paying yourself back and the payments were taken out of my paycheck. We needed it for some renovations on the house and I have the money to pay it back now, just have to get the forms etc.
DH has borrowed from his for my e ring but paid it back pretty quickly.
the opnly thing is if you were to be fired or choose to leave the company, it has to be paid back right away. Maybe 2 weeks if I remmeber correctly? not sure what happens if you can't
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| Posted 7/10/12 3:15 PM |
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nraboni
Uggh...
Member since 10/09 6905 total posts
Name:
Nicole
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Re: hAve you taken money out of your 401k?
Posted by LoveMyHubby605
the opnly thing is if you were to be fired or choose to leave the company, it has to be paid back right away. Maybe 2 weeks if I remmeber correctly? not sure what happens if you can't
The above really depends on the company's 401K policy. Some companies make you pay it back in one lump sum while others will work out a payment plan and penalize you if you miss a payment.
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| Posted 7/10/12 3:17 PM |
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BeachGal
LIF Adult
Member since 2/10 2827 total posts
Name:
J
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Re: hAve you taken money out of your 401k?
Most plans i see are currently charging prime plus 1% (4.25%) but the rate would depend on what is stated in your plan document that your hr rep would have. The amount of the loan would depend on your vested balance.
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| Posted 7/10/12 6:25 PM |
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TheWhiteRabbit
Thru the rabbit hole!
Member since 7/06 4412 total posts
Name:
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Re: hAve you taken money out of your 401k?
I generally tell my clients they will lose about 40% to taxes between federal and state and the penalty. If you have an accountant just ask them to run the estimate for you, I do it for my clients all the time.
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| Posted 7/11/12 8:59 AM |
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Wendy
Wheeee!
Member since 5/05 13736 total posts
Name:
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Re: hAve you taken money out of your 401k?
Posted by Hofstra26
We took money from DH's 401K and it wasn't bad at all because we took it out as a loan against ourselves which you're allowed to do with NO penalties. The only thing is, you have to start paying yourself back right away (it's SUPER low interest rate, I think ours is less than 3%). The loan payback amount comes right out of DH's paycheck every week and goes back into his 401K.
This.
I've had to do it twice.
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| Posted 7/11/12 9:19 AM |
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Wendy
Wheeee!
Member since 5/05 13736 total posts
Name:
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Re: hAve you taken money out of your 401k?
Posted by nraboni
Posted by LoveMyHubby605
the opnly thing is if you were to be fired or choose to leave the company, it has to be paid back right away. Maybe 2 weeks if I remmeber correctly? not sure what happens if you can't
The above really depends on the company's 401K policy. Some companies make you pay it back in one lump sum while others will work out a payment plan and penalize you if you miss a payment.
This was not the case with one of my loans. When I was laid off from one job, I just continued to pay back the same monthly amount as I had when I was employed (I had almost 2 years left on the loan).
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| Posted 7/11/12 9:20 AM |
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LoveMyHubby605
Our April Baby is here!
Member since 4/11 2418 total posts
Name:
A
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Re: hAve you taken money out of your 401k?
Posted by Wendy
Posted by nraboni
Posted by LoveMyHubby605
the opnly thing is if you were to be fired or choose to leave the company, it has to be paid back right away. Maybe 2 weeks if I remmeber correctly? not sure what happens if you can't
The above really depends on the company's 401K policy. Some companies make you pay it back in one lump sum while others will work out a payment plan and penalize you if you miss a payment.
This was not the case with one of my loans. When I was laid off from one job, I just continued to pay back the same monthly amount as I had when I was employed (I had almost 2 years left on the loan).
oh, i guess it's my company's own policy then! Sorry for the misinfo!
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| Posted 7/11/12 3:39 PM |
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HoneyBadger
YourWorstNightmare.
Member since 10/06 15979 total posts
Name:
BahBahBlackJeep
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Re: hAve you taken money out of your 401k?
Posted by dctead
I did take out about 1500 from my 401k last year. I was able to do it as a Loan with the payments taken from my check (interest at that time was 4%)... there wasn't any penalty as it was done as a loan. Not sure if every company can do that.. but it worked easily for me.
I did this once also, though there wasn't any interest (because technically I borrowed from myself). Paid back the loan and it was done.
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| Posted 7/11/12 3:44 PM |
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headoverheels
s'il vous plaît
Member since 6/07 42079 total posts
Name:
LB
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Re: hAve you taken money out of your 401k?
Posted by Wendy
Posted by Hofstra26
We took money from DH's 401K and it wasn't bad at all because we took it out as a loan against ourselves which you're allowed to do with NO penalties. The only thing is, you have to start paying yourself back right away (it's SUPER low interest rate, I think ours is less than 3%). The loan payback amount comes right out of DH's paycheck every week and goes back into his 401K.
This.
I've had to do it twice.
We've done this as well, although for DH's job it's not called a 401K, it's something else, and the interest rate is super low - plus he is basically paying himself the interest (I have no idea if that's how a 401K loan works). I believe each time it was a 2-5 year payment plan, depending on the size of the loan.
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| Posted 7/11/12 3:59 PM |
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HoneyBadger
YourWorstNightmare.
Member since 10/06 15979 total posts
Name:
BahBahBlackJeep
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Re: hAve you taken money out of your 401k?
Posted by KittyTheTax
I generally tell my clients they will lose about 40% to taxes between federal and state and the penalty. If you have an accountant just ask them to run the estimate for you, I do it for my clients all the time.
I thought this was only if you liquidate the entire thing?
Message edited 7/11/2012 4:05:27 PM.
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| Posted 7/11/12 4:02 PM |
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MST9106
My life:)
Member since 6/06 9589 total posts
Name:
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Re: hAve you taken money out of your 401k?
You have to check your company's policy but generally it is a great idea to borrow if you're in a financial rut and need help right away. Most plans offer super low interest rates and different plans. I know my company's plan allows you to borrow up to 50% of your 401K fund at a rate of 2.75 or 3% and you have anywhere between 1-5 years to pay it off. I think it makes a lot more sense to borrow from your 401K to pay off lets say a card that is charging you 15-29.99% APR rather than continuing to pay crazy interest rates.
You only get penalized for early withdrawals of the full fund, if you're even allowed to withdraw early which I believe in most 401Ks you can't.
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| Posted 7/11/12 4:36 PM |
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TheWhiteRabbit
Thru the rabbit hole!
Member since 7/06 4412 total posts
Name:
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Re: hAve you taken money out of your 401k?
Posted by HoneyBadger
Posted by KittyTheTax
I generally tell my clients they will lose about 40% to taxes between federal and state and the penalty. If you have an accountant just ask them to run the estimate for you, I do it for my clients all the time.
I thought this was only if you liquidate the entire thing?
If you take money out as a distribution opposed to a loan, whether all or a portion. It wasn't clear to me if she meant a loan or actual early distribution. If it's a loan there's no income tax consequence. I may have totally misread the OP I didn't realize she wanted a loan... I’m blonde now, ya know 
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| Posted 7/11/12 4:42 PM |
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Xelindrya
Mommy's little YouTube Star!
Member since 8/05 14470 total posts
Name:
Veronica
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Re: hAve you taken money out of your 401k?
I took 13k to buy my house
Needed 8k for closing and spent the rest on house stuff.
It was easy peasy to be honest.
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| Posted 7/11/12 5:09 PM |
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Xelindrya
Mommy's little YouTube Star!
Member since 8/05 14470 total posts
Name:
Veronica
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Re: hAve you taken money out of your 401k?
Posted by LoveMyHubby605
Posted by Wendy
Posted by nraboni
Posted by LoveMyHubby605
the opnly thing is if you were to be fired or choose to leave the company, it has to be paid back right away. Maybe 2 weeks if I remmeber correctly? not sure what happens if you can't
The above really depends on the company's 401K policy. Some companies make you pay it back in one lump sum while others will work out a payment plan and penalize you if you miss a payment.
This was not the case with one of my loans. When I was laid off from one job, I just continued to pay back the same monthly amount as I had when I was employed (I had almost 2 years left on the loan).
oh, i guess it's my company's own policy then! Sorry for the misinfo!
My company has the same condition. If you take a loan from our 401k and no longer work for the company you owe it all at the time of termination. in full.
Scares me to the bone!
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| Posted 7/11/12 5:11 PM |
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