More People Tap 401(k) Accounts for Cash

[RobertB]

More People Tap 401(k) Accounts for Cash

By J.W. ELPHINSTONE

AP Business Writer

Trent Charlton knew the risks when he borrowed $10,000 from his 401(k) and cut his retirement savings in half.

But Charlton, a 40-year-old account executive at an Irvine, Calif., trucking company, said he had little choice because he and his wife could not keep up with monthly expenses after American Express reduced the limits on three credit cards.

As home prices fall and banks tighten lending standards, more people are doing the same thing: raiding their retirement savings just to get by and spending their nest eggs to gas up SUVs, pay mortgages or put food on the table.

But dipping into 401(k) accounts can carry risks because defaulted loans and hardship withdrawals are taxed as income and are subject to a 10 percent penalty if the worker is under 59 1/2 years old. That means if the trend grows, many Americans will risk coming up short on retirement savings or may have to rely on an overburdened Social Security system.

http://seattletimes.nwsource.com/html/businesstechnology/2004189874_apborrowingagainstretirement19.html?syn dication=rss

[Eternally]

We were told by dh's human resources that since he was laid off after his 54th birthday, that when he turns 55 next year he can withdraw from his 401k without penalty.

Anyone know about this?

[Nova]

Eternally, try this link. I thought you could withdraw money without penalties. But wasn't sure. I can't vouch for the site. I just ran a search.

http://www.401khelpcenter.com/401k_education/hardship_withdrawal_article.html

[I'm all 67X]

Sounds like the beginnings of a snowball effect.

My brother said he's thinking of taking it all, he lost $2K last month and I can't remember how much before that. I'm curious about this month...

People say I'm an idiot, but I just don't trust the 401K. I think I might tend to obsess and worry about it too much if I did.

Mammon! :shifty

[NewWorldOrder]

My husband's 401k is set up where you can borrow the money, and pay it back with interest to yourself without any penalty. We've borrowed the money, and are paying it back. The funny thing is, when we borrowed it, the stock market dived, and if we had left it in there it wouldn't have been worth as much. It's almost like it helped us to borrow the money, instead of leaving it there.

[FarmBoy]

Sounds like the beginnings of a snowball effect.

My brother said he's thinking of taking it all, he lost $2K last month and I can't remember how much before that. I'm curious about this month...

People say I'm an idiot, but I just don't trust the 401K. I think I might tend to obsess and worry about it too much if I did.

Mammon! :shifty


If the snowball rolls fast and hard it will cause the stockmarket to deflate. The soon to retire baby boomers will pull out to save whats left of retirement and the "buy and hold"/"it will go backup" people will be left holding the empty bag and wondering what happened.

[Seemomgonuts]

My husband's 401k is set up where you can borrow the money, and pay it back with interest to yourself without any penalty. We've borrowed the money, and are paying it back. The funny thing is, when we borrowed it, the stock market dived, and if we had left it in there it wouldn't have been worth as much. It's almost like it helped us to borrow the money, instead of leaving it there.



Funny you say that- we have the same program and the same thing happened. We were contemplating taking out a loan to do our kitchen, and chose that route instead. We will come out ahead in the end- go figure! :idunno

[jeffebornagain]

i lost $700 last year. I didnt roll my old 401k into my new job.

With all the current financial woes and potential for disaster looming in the not to distant future, would it not be prudent for me to just yank it all, pay the tax and penalty and invest it elsewhere? I'm only 40. I could roll it into something else i guess. I'm not very knowlegeable about this stuff.

[RobertB]

i lost $700 last year. I didnt roll my old 401k into my new job.

With all the current financial woes and potential for disaster looming in the not to distant future, would it not be prudent for me to just yank it all, pay the tax and penalty and invest it elsewhere? I'm only 40. I could roll it into something else i guess.
But, where would you safely invest it and get a return that would beat inflation? At the moment, with all the financial volatility, government securities might be the safest, but the yield would probably be less than the "real" inflation rate.

[I'm all 67X]

If the snowball rolls fast and hard it will cause the stockmarket to deflate. The soon to retire baby boomers will pull out to save whats left of retirement and the "buy and hold"/"it will go backup" people will be left holding the empty bag and wondering what happened.

:thumb