Page 1 of 2 12 LastLast
Results 1 to 10 of 11

Thread: Change in 401K Rules

  1. #1
    Join Date
    Feb 2016
    Location
    North Alabama
    Posts
    5,310
    Feedback Score
    19 (100%)

    Change in 401K Rules

    My understanding is that one change with the Covid 19 relief act is that you can withdraw up to $100,000 penalty-free from your 401K (still taxed income of course).

    I have a good bit of debt, like many Americans. I am considering withdrawing the maximum and using it to pay off the cars, whatever we have on credit cards, pay down the house and refinance what home debt remains at the current low interest rates.

    I am retired military, 50% VA disabled, with a good job and am about 10 years from retirement.

    Am I crazy for being tempted, or should I stay the course and trust the market will recover?

    Andy

    P.S. I did not move my investments to bonds ahead of the crash and I understand withdrawing would "lock in" the loss in my 401K's value.

  2. #2
    Join Date
    Dec 2015
    Location
    NC
    Posts
    3,120
    Feedback Score
    50 (100%)
    Your PS covers my initial thoughts. In a reverse process I have an outstanding loan on my 401k that I actually want to pay off in the next couple months. I borrowed the money at one of the peaks of the market. So paying off will allow me to GAIN value. Anyway.

    If I recall correctly, you can actually pay back the money within three years and avoid penalties. So if you can look at it more like that way, little downside. Absolutely pay off the CCs and any expensive debt.
    The house... Without getting into your details that generally isn’t a good idea for most people. If you wanted to use some of the money to push down the principal to make the refinance better, sure/maybe. If you can PAY OFF your house, sure. But if you will be doing a refinance and end up with a moderate-high house payment anyway, no way, just leave the 401k out of it.

    Without pulling any info, I also thought the withdrawals had to be related to COVID-19 to qualify. Of course, I’m sure anyone can justify this if they try hard enough. The only reason I’m not pulling a withdrawal and then flipping around to pay off my loan with the money is that I am personally acquainted with the plan administrators at work and...I think that would be borderline dishonest, since I have not been affected.

  3. #3
    Join Date
    Oct 2011
    Location
    Utah
    Posts
    2,764
    Feedback Score
    0
    We may or may not be at the bottom of the market right now, personally I think it is gonna drop another 10% or so before the country starts to get back on its feet. What we can be sure of though is that the market will recover. If you are currently down about 30% and withdraw that loan you will lose out on any recovery. I don't know what your interest rate is on your debt, but I bet it is a hell of a lot lower than 30%. Those would end up being some damned pricey automobiles.

    My personal decision (not financial advise for others) was to take money I had in cash savings to fund my and my wife's Roth accounts and buy in now. Right now stocks are on sale at "fire sale" prices. I believe we will recover so I took advantage of the "sale prices".
    Go Ukraine! Piss on the Russian dead.

  4. #4
    Join Date
    Feb 2016
    Location
    North Alabama
    Posts
    5,310
    Feedback Score
    19 (100%)
    Quote Originally Posted by utahjeepr View Post
    We may or may not be at the bottom of the market right now, personally I think it is gonna drop another 10% or so before the country starts to get back on its feet. What we can be sure of though is that the market will recover. If you are currently down about 30% and withdraw that loan you will lose out on any recovery. I don't know what your interest rate is on your debt, but I bet it is a hell of a lot lower than 30%. Those would end up being some damned pricey automobiles.

    My personal decision (not financial advise for others) was to take money I had in cash savings to fund my and my wife's Roth accounts and buy in now. Right now stocks are on sale at "fire sale" prices. I believe we will recover so I took advantage of the "sale prices".
    That is a good point, and equally true regardless if it's a withdraw or a loan. I know staying the course is the best thing logically, but I am an American and want it all NOW, dammit.

  5. #5
    Join Date
    Feb 2013
    Location
    NC
    Posts
    518
    Feedback Score
    0
    Quote Originally Posted by utahjeepr View Post
    My personal decision (not financial advise for others) was to take money I had in cash savings to fund my and my wife's Roth accounts and buy in now. Right now stocks are on sale at "fire sale" prices. I believe we will recover so I took advantage of the "sale prices".
    Same here, we put money in our Roth’s and other accounts. When the recovery takes place, we’re going to make a lot of money off this.

  6. #6
    Join Date
    Dec 2015
    Location
    NC
    Posts
    3,120
    Feedback Score
    50 (100%)
    Quote Originally Posted by utahjeepr View Post
    My personal decision (not financial advise for others) was to take money I had in cash savings to fund my and my wife's Roth accounts and buy in now. Right now stocks are on sale at "fire sale" prices. I believe we will recover so I took advantage of the "sale prices".
    This.

  7. #7
    Join Date
    Aug 2011
    Location
    N.E. OH
    Posts
    7,595
    Feedback Score
    0
    Pulling out of the market now, is the worst timing ever.
    How much % did your 401k go down?
    How much interest are you paying?
    How much future $ are you missing out on because you are losing 10years of growth?

  8. #8
    Join Date
    Oct 2008
    Location
    Maine
    Posts
    2,156
    Feedback Score
    3 (100%)
    I’ve been fighting with mounting credit card debt for almost four years now ever since my union had a bad contract negotiation and we all lost $10,000-$15,000 in wages a year, I had to fall back on my credit card numerous times and only in the last year or so have I stabilized to the point where I haven’t needed to use the card much. But the debt remains. Even being able to pull 5k out of my 401k and direct it toward wiping out a chunk of that debt would ease the monthly burden on me by a lot.....but it seems it’s just a bunch of bad options and all you can do it pick the least worst...

  9. #9
    Join Date
    Aug 2009
    Location
    Texas
    Posts
    1,789
    Feedback Score
    49 (100%)
    ooof... pretty ballsy trying to time the bottom; just keep your risk management tight and be fluid. keep this in mind though -

    https://drive.google.com/open?id=1qS...72YnIv8pjbLni5
    Matthew 10:28

  10. #10
    Join Date
    May 2012
    Posts
    3,091
    Feedback Score
    0
    If you need to pull the money out to keep a roof over your head, feed the family, and keep a vehicle you need to work...
    Do what you have to.

    If not,
    Don’t.
    “Where weapons may not be carried, it is well to carry weapons.”

Page 1 of 2 12 LastLast

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •