withdrawing from 401K to get caught up and ahead - Page 2

lamby248 · 07-17-2007, 02:04 PM

Quote:

Originally Posted by mama_of_twins

I guess I didn't realize that the money had to be paid back. I thought that we would just "start over" .
I knew that they tax you on it and that a 10-20% penalty is added. But that seems worth it to stop the phone calls. I am just so tired of it all. My girls have all been worth it, but ugh!
We have made some bad money choices. We were doing so well before I got pregnant, then I had to quite work (per doctor's orders). Blew through savings. Started using cc's to pay bills (big mistake). Sold our house. bought a much cheaper house. NICU costs, Abbey's medical bills. Things just started to pile up and now we are drowning and I am looking for a way out.

We have called both hospitals. One has put us on a 100/month payment plan and the other won't . Abbey alone has 5 different doctors that we have to see twice a year(20 copay a piece that we pay on the spot).
Sometimes I feel like why us? But I must admit that they are well worth all the money and stress.
I am just so tired of all the money problems. Tired of getting so many "we want our money" phone calls. I know that they need their money, but we just don't have it.
ok, this has turnedinto a major pity party and I am done.
Thanks for reading if you still are.

I know that I have more research to do.

I was talking about withdrawing a loan from your 401k.. if you do a loan, you have to pay it back with interest like a cc. I had to do a 401k loan a few years ago and it was somewhere around 4%, but now it is 8.75%. I could pay it back with payroll deductions and could choose how many years to pay up to 5.

With a hardship withdrawal , there is a 10% penalty since you are not 59-1/2, but you don't have to pay it back, you are out that money in your 401k though. I think there are more strict guidelines to go by with a hardship withdrawal. I haven't personally ever done it this way, and the people I know have been over 59-1/2...

Aubrey's mom · 07-17-2007, 02:57 PM

Quote:

Originally Posted by lamby248

With a hardship withdrawal , there is a 10% penalty since you are not 59-1/2, but you don't have to pay it back, you are out that money in your 401k though. I think there are more strict guidelines to go by with a hardship withdrawal. I haven't personally ever done it this way, and the people I know have been over 59-1/2...

Under my company's 401(k) medical bills will qualify (it qualifies under the IRC rules) for a hardship withdrawal. However, you may need to show some documentation to the provider in order to qualify. It will depend on how your 401(k) is set up. I also think you pay a flat 20% tax plus the 10% penalty for being under 59 1/2. If this is your DH's account he should be able to get this information from his benefits department.

aliadam · 07-17-2007, 07:16 PM

I wouldn't because you lose tons of money and have to pay taxes ( I think) on what you withdraw also. It would be my VERY last resort.

mommymarie · 07-20-2007, 07:30 PM

I have been debating this myself for a while now. I'm thinking we could start over debt free and then start rebuilding our retirement fund with the extra money we would have since we would not be paying anymore interests. I know we had our lesson with the debts and I don't think we will get in this kind of mess again, but... what if something happens...

Then I'm thinking maybe we should build an emergency fund before, just to make sure we don't get into debt again if bad luck happens.

Lots to think about.

We have not taken our decision yet, have you??

Me&My2girls · 07-21-2007, 12:11 AM

When i took economics it was the #1 NO NO and HECK NO!!! We have never withdrawn- simply for the reasons that first of all, there is almost (not always) a penalty for withdrawing early, and once you do it- it's even easier to do it the next time! And the next time it gets even easier- and easier- then when you turn 50 you realize that you have 50 bucks a year saved up for when you retire-