Withdrawl your 401K plan?

I don't think (personal opinion here) that age has much to do with it. Retirement savings should start as early as possible and needing to build it back up is something I wouldn't want to be in a position to do. A regular savings account, sure... that I'd take from because I'd have it in place for emergencies, but not retirement.

Here's the thing... I've known *way* too many "young people" who have a completely different view on what's an emergency or needing money badly than I or others do. I won't give examples so I don't offend anyone but there are very few true emergencies. Actually if someone reaches retirement age and doesn't have enough money because of slivering away at it over the years... well *that* could be an emergency.

 

I mean, it's not a bad thing if you really, really need the money. I would try as hard as possible to hang onto it, though. It's easy to blow through that money with the intention of paying it back (to yourself, but you know what I mean), but then life can happen and make it impossible to do so.

 

My mother has finally started drawing money from her 401K plan but she's also in her 60s at this point. If I were younger it would be pretty easy for me to just pull out money from my 401K and call it a day. Since I'm not younger at this point I wouldn't even dream of it. Some people may want to take that risk but since I am middle aged it is my nest egg.

 

Yeah. I had to do it once. It is painful to take that hit from the IRS. I wouldn't wish it on even my worst enemy.

 

I read that the IRS takes up to 33% right off the top, which could cost thousands of dollars if you have a pretty good amount of money in the account, plus I remember something about an additional 10% for something else. If push came to shove though, I would rather pay the taxes than become homeless, but fortunatly I am not in that boat.

 

I think that if you have a current 401k plan in place, just keep it. If you withdrawal it now, you'll lose all the progress you've made and you'll never see a reason to want to start a new one again if you regret it. I know my dad is stressing a lot about his retirement plan and how it used to be worth it to have one, but now it just seems pointless! I won't be making a retirement fund, but will be putting money in a side account or investing in CD's to save for when the time is right. I'd rather know my money was saved successfully and taken care of and watch it grow every time I log in to my bank account. It's a lot of fun seeing your money grow when you make deposits. Just sit tight and watch it carefully for now, or take action and make a plan like mine to keep a separate bank account and put funds away. It's probably more manageable and more beneficial when you see it grow when you make a deposit instead of it looking like it made your paycheck smaller, when in reality that's what it has done anyway. But still, just watch it closely!

 

It is never a good idea to cash in your 401k. You are going to really regret it later. I've seen this so many times. The compound interest aspect means that you'll probably never be able to catch up. I've seen compound interest calculations showing someone who invests $100 a month from age 24 to 30 (and then stops contributing) will have more money at 65 than somebody who pays $100 per month from age 35 to 65. That is the power of compound interest!

 

I would definitely try to leave your retirement plan alone unless it's an absolute emergency. The penalties are rather terrible and not worth it. However, if you do withdrawal, I would do it at a young age and with a job that you plan to be at for a long time so you can pay it back. I know some companies just take the payment out of your pay check and you pay it back that way. They charge interest, but from what I understand, the interest you pay is paid back to you.