Early 401K Withdrawal - Talk Me Down Off the Ledge!

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Early 401K Withdrawal - Talk Me Down Off the Ledge!

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ddutton

posts: 20

Nov 11, 2008 5:55 PM ET Quote Report Abuse

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Oh, my National Treasure Friend - you are so right about the 401K, its one of the "evil, capitalistic" items that are up for grabs as we embrace "Change" and "Hope". So government control is a good thing, after all you are not capable of making good decisions with your money so the government is going to bail out your 401K, taxing it AND maybe ensuring that all people make exactly the same 3% growth on their money. That is the plan being "floated" to Congress as a solution to increase tax revenue and capture your 401K dollars.

So, I would actually wait until the legislation is mulling around Congress, early 2009 keep eyes and ears open - contact ALL conservative members of Congress, the Chambers of Commerce and all other business oriented organizations - then, utilize any valid method to convert your 401K into dollars today - tax or no tax.

No matter if you put them in your business - also I hear that property can also be utilized in some forms of 401K -

Realize there are two issues here - 1. who controls my 401K and 2. Bootstrapping until all the boots fall off!

RegRep

posts: 2

Nov 11, 2008 6:09 PM ET Quote Report Abuse

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I love the juxtaposition of the two highlighted articles on the SUN newsletter: "Talk me down off the ledge" and "Do it now".

#1 - You`ve been listening to too much Limbaugh or watching too much Faux News.

Bottom line, as long as you are employed and the employer has a 401K plan (qualified retirement plan), you are pretty much stuck with the 401K. But, as another poster said, the first thing you should do after leaving the company is to roll over the 401K into an IRA.

If you are self-employed, then what the heck are you doing with a 401K?

The `08 401K contribution limit is $20,500 for age 50 and over -- attractive if you are looking to protect self-employed income from taxes. The SEP limit is $46000 if you fall into the high end of BHO`s "rich" category.

bigfish

posts: 1

Nov 11, 2008 8:31 PM ET Quote Report Abuse

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Hello Everyone,

First unless you are terminated from your employee or are retired or over age 59 1/2 you CANNOT just take ALL the money out of your 401k while you are an active employee, you may have some options such as an in--service withdraw or a loan in which you borrow from yourself and pay yourself back interest but those options are plan specific which mean the rules for GM plan will be totally different from the Google 401k plan.

Now if you are terminated from the company you CAN pull the money out and roll it over into a TRADITIONAL IRA OR ROLLOVER tax deferred however if you want to roll it into a ROTH IRA it will be treated as a withdraw and taxes Federal (mandatory) & state (some optional) will be withheld PLUS and additional 10% penalty at the end of the year.

If anyone has any questions please feel free to ask me as I currently handle 401ks for the largest Recordkeeper and Mutual Fund Company in the USA every day so I welcome your questions.

BizFinAdvisor

posts: 3

Nov 11, 2008 9:14 PM ET Quote Report Abuse

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Sorry big fish--

I have to correct what big fish wrote regarding rolling over to a ROTH IRA

"however if you want to roll it into a ROTH IRA it will be treated as a withdraw and taxes Federal (mandatory) & state (some optional) will be withheld PLUS and additional 10% penalty at the end of the year"

First part is right, the last part is wrong, converting to a Roth IRA will insure Federal and State taxes depending on your income bracket but it is not penalized.

In fact as I posted earlier in 2010 almost anyone regardless of income will be able to convert to a Roth IRA, and postpone the tax bill (1/2 in 2011 and the other 1/2 in 2012).

I am not sure what congress will do but I have to say what they may be proposing would be career suicide, as the people with the retirement balance is also the major voting pool!!

I am not for or against any method, I simply use what works, from the Roth 401k to the 412i plan to money management and so on. And I think what business owners want the most is the ability to outsource key parts of their business so they can concentrate on thier core competency; thats what I offer my clients.

Thanks--Aaron

ginnyo

posts: 1

Nov 12, 2008 3:46 AM ET Quote Report Abuse

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I agree with you 100%, I to am resisting the temptation to just take the penalty! I heard you could fund a business through your IRA, but I have not checked into it! I have become a cynic when it comes to the government and banks, I know there is a catch, the price is probably higher then the penalty!

et

posts: 3

Nov 12, 2008 4:17 AM ET Quote Report Abuse

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Invest your 401(k) or IRA in yourself (your business)...use your funds to build your business. It is easy, well managed, and relatively inexpensive. It is how I obtained seed capital for my company. Feel free to give a call and I will walk you through this option.

Eric Togneri

President, Neri Capital Partners

973-634=4908

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