401k withdrawal

[coldfusion]

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@Anonymous wrote:

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@coldfusion wrote:

To touch on one question asked but I didn't see answered:  If your 401K is through your current employer, your plan permits it (some do, most I believe don't),  and you meet any and all mininum age and other requirements you may be able to execute what is known as an in-service rollover to an IRA. 

I agree with everyone else that raiding your 401K really should only be done as a last resort and you would want to understand every one of the potential concenquences of doing so before you did it.

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While I generally agree with the party line: we are talking $12.5K at age 45.     While better than 0, it's not a whole let better, so raiding it isn't going to imperil an otherwise comfortable retirement.   You certainly don't want to pay the tax and penalties (which greatly reduce the amount that can be used to pay the cc debt) but it might be better than some other alternatives

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Even without factoring in the 10% penalty and the income tax due against the withdrawal it still only addresses a minority of the debt.

Besides, if the worst case senario were to unfortunately play out, assets that are in a 401K I believe generally remain protected through a BK.  If the assets have been cashed out they are no longer protected.

[Horseshoez]

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@coldfusion wrote:

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@Anonymous wrote:

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@coldfusion wrote:

To touch on one question asked but I didn't see answered:  If your 401K is through your current employer, your plan permits it (some do, most I believe don't),  and you meet any and all mininum age and other requirements you may be able to execute what is known as an in-service rollover to an IRA. 

I agree with everyone else that raiding your 401K really should only be done as a last resort and you would want to understand every one of the potential concenquences of doing so before you did it.

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While I generally agree with the party line: we are talking $12.5K at age 45.     While better than 0, it's not a whole let better, so raiding it isn't going to imperil an otherwise comfortable retirement.   You certainly don't want to pay the tax and penalties (which greatly reduce the amount that can be used to pay the cc debt) but it might be better than some other alternatives

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Even without factoring in the 10% penalty and the income tax due against the withdrawal it still only addresses a minority of the debt.

Besides, if the worst case senario were to unfortunately play out, assets that are in a 401K I believe generally remain protected through a BK.  If the assets have been cashed out they are no longer protected.

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That is true, retirement income is fully protected by law from the Trustee grabbing it.  The only thing the Trustee can do is to confirm you already have an established pattern of contributing into the fund; if you do, then he or she must allow you to continue contributing through the duration of a Chapter 13.

[Anonymous]

In my opinion, it's time to go back to the drawing board on this debt problem. After penalties and taxes, the amount you'd have left to put towards the debt would be arguably negligible. In other word, you'd still have a debt problem and then you'd have a retirement fund problem too. 

I'd look towards increasing income and lowering expenses. So, time for a second job for one or both of you. Everywhere is hiring, so it should be easy to find something. As for expenses, cut out all of the unnecessary items in the budget.  All extra money goes to the debt. 

There is no easy way out of debt, unfortunately. 

[soxfaininfl]

Thanks everyone for the responses! I appreciate the advice. Unfortunately bankruptcy is out of the question as I am 5 years out of a chapter 7. I would file again if I could, but I can't.  

[Horseshoez]

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@soxfaininfl wrote:

Thanks everyone for the responses! I appreciate the advice. Unfortunately bankruptcy is out of the question as I am 5 years out of a chapter 7. I would file again if I could, but I can't.  

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You may not be aware of this, but there is only a 4-year window between filings if you go from a Chapter 7 to a Chapter 13; said another way, you are eligible to file a Chapter 13 right now.

[soxfaininfl]

Chapter 13 isn't an option for me right now as I need to get a parent plus loan to help my son pay for college for the 2nd half of the year for 6k. 

I contacted Fidelity, that said I don't no quality for a hardship withdrawal nor can I liquidate the account unless I've been unemployed for 30 days straight. They don't offer either an in-service rollover to an IRA. Right now I have 13,000 in my 401k. I understand there is a 10% penalty for withdrawing early, but this money would eliminate half of my monthly credit card payments on a monthly basis. I pay roughly about 1,200 a month. That would leave me with only 4 accounts to pay off. 

Amazon 5k 161 a month 

CapitalOne quicksilver 3,500 110 a month 

CapitalOne Savor 5,500 160 a month

Upgrade 5k 210 a month

There has to be a way for me to get my money some how. I also owe the IRS over 10k for 3 different years, and they want payment for one of the years. I can get an installment agreement for one year, but they won't do it for the three different years I owe from what I understand. 

These are the hardships withdrawal reasons that they have currently. 

There has to be a way somehow for me to get my money. 

[Anonymous]

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@soxfaininfl wrote:

Chapter 13 isn't an option for me right now as I need to get a parent plus loan to help my son pay for college for the 2nd half of the year for 6k. 

I contacted Fidelity, that said I don't no quality for a hardship withdrawal nor can I liquidate the account unless I've been unemployed for 30 days straight. They don't offer either an in-service rollover to an IRA. Right now I have 13,000 in my 401k. I understand there is a 10% penalty for withdrawing early, but this money would eliminate half of my monthly credit card payments on a monthly basis. I pay roughly about 1,200 a month. That would leave me with only 4 accounts to pay off. 

Amazon 5k 161 a month 

CapitalOne quicksilver 3,500 110 a month 

CapitalOne Savor 5,500 160 a month

Upgrade 5k 210 a month

There has to be a way for me to get my money some how. I also owe the IRS over 10k for 3 different years, and they want payment for one of the years. I can get an installment agreement for one year, but they won't do it for the three different years I owe from what I understand. 

These are the hardships withdrawal reasons that they have currently. 

There has to be a way somehow for me to get my money. 

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I mean, it seems like they clearly spelled out your options, which are pretty much non existent. 

Even IF you were to be able to liquidate the fund, you're going to be on the hook for more than just the 10% penalty. Don't forget about the taxes owed on it. 

All you are trying to do is kick the can down the road here. Your financial position is teetering on the edge of the cliff, if it hasn't already fallen off that is. Lots of CC debt, past due taxes owed, and potentially another loan....

If BK isn't an option to at least explore, you simply need more income then. I'd give up on the 401k withdrawal and seek some viable options. 

[jmw1]

Ignoring the inability to do a 7 right now, you are currently in a bankruptcy situation. You know it. I know it. As you are probably already aware, 401k are completely exempt from creditors except taxes and domestic support obligations. So you should not pay a dime to creditors from the 401k.

As far as your college aged kid, you need to completely get rid of the idea of helping finance his education. He can find a cheaper school or work or finance it himself or delay college. Cry me a river if he won't work and has to drop out. Honestly, I think it's very irresponsible for you to think you can support an adult's college education for many reasons. You can't afford payments already as it is. You owe back taxes to super creditors with super collection powers who have the power to ruin your life. You should not be financing his education on the backs of your other creditors you are unable to pay back. And student loans cannot be discharged in bankruptcy.

You can do a chapter 13 right now and it would be a good way out of this mess because chapter 13 is great at paying down required priority arrearages like taxes and mortgages in five years. The tax authority and mortgage can't say no. The 13 has an advantage because it will force you to pay down ALL of the tax debt at the expense of your unsecured creditors, who may end up getting nothing. I think that's a superior result vs. chapter 7.  You will finally learn to live on 100% cash because you will be forced to do it. The court won't even let you use a card to pay your court fees. It's all cash from here on out. You will finally realize financing a college education is totally out of the question. It will teach you how to manage your finances properly. Your 401k will be fully intact. This board is actually kinda dangerous because you get sucked into more debt with auto loans and credit card approvals when you really should be living on cash. Even 0% loans are bad because they come with monthly payments.  You will need trustee and court permission to incur debt, which is probably a good thing. 

I think you should do a 13 and deal with the back taxes and get that zeroed out at the end of the 13.

[LadyJEsq]

Hi OP, sorry to hear of the financial straits you're in. I'm in somewhat of a similiar financial straits, in that I too have about 35k in CC debt. For me though, I have enough in my 401k to cover this debt and still leave 6figures for my retirement, and yet dipping into it has not crossed my radar. I just don't think that's something that I should be doing. Right now, I'm looking to join some CUs that have $0 balance transfer fees and will hopefully get a few CCs that I can balance transfer this debt to. I'm also looking into no fee personal loans if I can't get a CC, or a combination of CCs that'll fully cover the debt. It won't solve my problem, but it will allow me to kick the can down the road a bit, assuming I'll be approved. I say assuming because all of this debt is sitting on one card, nearly maxing it out which has had a tremendous impact on my credit scores which were in the 800s and now are in the low 750s. I know I'll be paying interest for a little while longer, but since my purchases were made for investment reason, and I believe they'll yeild significant ROI, I'm okay with that. But I do want to get all that debt off the one card because it's still being used as my daily driver and I get even closer to my limit depending on when my payment hits and when I make a purchase. Discover has been great in that when that happens it does give me 1k CLI which at least takes me from the brink, but I know that won't keep happening. Once I finish joining CUs, which can be conservative, I'll do an app spree for a new daily driver with a nice cash back reward percentage. 

I don't know if this is an option for you since you are carrying debt on all your cards where as I'm only carrying it on one card, but I thought I would through this out there because I don't think your 401k should be an option at all given your age. Some CUs are offering $0 balance transfer fee and a period of 0% APR, like Navy Federal which I hear can be generous with their CLs.

Good luck in whatever avenue you choose to take!