Money and Finance Because you have to save money to spend it on new paintball stuff!

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Old 04-19-2015, 02:37 AM   #1 (permalink)
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Cash out 401K

I will be starting a new job in a few months and moving to a different state. Should I cash out my 401K (only has about 6K in it) and use the money to payoff my credit card (around 2K) and use the rest for moving expenses?
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Old 04-19-2015, 03:09 AM   #2 (permalink)
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You can roll it over to your new companies 401k plan
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Old 04-19-2015, 03:40 AM   #3 (permalink)
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If you cash it out taxes will be subtracted from the total. Plus there may be an early withdrawal penalty. The other thing is the amount you actually get will be counted as income for the year. You'll receive a 1099R (I believe that's the correct form) and will have to file it with your taxes. IMO it's not worth cashing it out.
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Old 04-19-2015, 03:49 AM   #4 (permalink)
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If you really need the cash and have no other source of income for a bit, cash out. I had to when I moved from California to Utah but was able to find work quickly so it all worked out in the end.
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Old 04-19-2015, 05:23 AM   #5 (permalink)
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Not sure if timing would work but you might be better off rolling it into the new one then taking out a loan from it, pay the CC and pay yourself back into the 401k.

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Old 04-19-2015, 08:05 AM   #6 (permalink)
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If at all possible leave the 401k alone amd just roll it over
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Old 04-19-2015, 11:21 AM   #7 (permalink)
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Like others have said, cashing out is never a good idea unless you have no choice. Look into either keeping it where it is, or rolling it over into an IRA or your new company's 401k.
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Old 04-19-2015, 11:54 AM   #8 (permalink)
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Roll it over to the new company 401k and if you still need money for credit card take a loan on it and you'll be paying yourself off with no tax penalties etc
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Old 04-19-2015, 11:59 AM   #9 (permalink)
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Definitely not. Cashing out a 401K should only be considered as an emergency last resort. Between the early withdrawal penalties and taxes owed, you will lose approximately half of your money. Doesn't make much sense to lose almost 50% of your hard-earned cash just to pay off a minor loan and cover moving expenses.

EDIT: The percentage lost when cashing out a 401K is based on what state you live in. Here in CT, it's 6%. So, if I cashed out my 401K I would pay federal tax on the withdrawal of 30%, plus 6% to CT, plus an additional 10% penalty = 46% (almost half my money).
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Old 04-19-2015, 12:50 PM   #10 (permalink)
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Originally Posted by river031403 View Post
if you still need money for credit card take a loan on it and you'll be paying yourself off with no tax penalties etc
just make sure you actually pay off the loan.
if you can't or don't, within a month or so, someone will knock on your door wanting 50% of your unpaid balance on the loan.
The unpaid balance will be seen by the IRS as income that wasn't taxed.
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