Comments on: What is the penatly for taking out early retirement? http://www.1retirementplan.com/what-is-the-penatly-for-taking-out-early-retirement/ Tue, 27 Sep 2011 05:39:45 +0000 http://wordpress.org/?v=2.9.1 hourly 1 By: digdowndeepnseattle http://www.1retirementplan.com/what-is-the-penatly-for-taking-out-early-retirement/comment-page-1/#comment-771 digdowndeepnseattle Mon, 19 Jul 2010 20:28:26 +0000 http://www.1retirementplan.com/what-is-the-penatly-for-taking-out-early-retirement/#comment-771 you're out of luck...best way is to roll it all into your new employer then take a loan from that (make sure you can do this though!). It doesn't eliminate the debt and may actually increase your monthly payments but at least you're paying yourself the interest and not the credit cards. Doing it this way also keeps you from incurring a penalty. Lastly it also keeps you from killing your retirement. You'll have to pay it back within 5 years and will be doing so with interest so you're only losing the interest differential between what the plan charges (likely 10.25%) and what you would otherwise have earned. Doing it this way also means no taxes so no withholding. You can actually take a 30k loan (50% of the 60k) which is just a little lower than what you would have received if you took the cash distribution (60k - 12k withholding - 6k extra tax) and pay off nearly the same amount of debt. If you can't do that? try refinancing your house (even if interest rate is 1% higher than current rate)...better to do that then decimate your 401k duing your prime earning years. In the next 10 years that 40k is gonna be around 100k and will be at 315 at age 67. If you refinance your house and amortize the payments over the next 25 years you'll still have it paid off by the time you hit 67 and won't have killed your retirement. I'm being realistic here...certainly the extra payment made to the home loan COULD be invested and twist the benefit around but most likely you wouldn't and would spend it. So the benefit still lies in the forced saving of the 401k. you’re out of luck…best way is to roll it all into your new employer then take a loan from that (make sure you can do this though!). It doesn’t eliminate the debt and may actually increase your monthly payments but at least you’re paying yourself the interest and not the credit cards. Doing it this way also keeps you from incurring a penalty. Lastly it also keeps you from killing your retirement. You’ll have to pay it back within 5 years and will be doing so with interest so you’re only losing the interest differential between what the plan charges (likely 10.25%) and what you would otherwise have earned.

Doing it this way also means no taxes so no withholding. You can actually take a 30k loan (50% of the 60k) which is just a little lower than what you would have received if you took the cash distribution (60k – 12k withholding – 6k extra tax) and pay off nearly the same amount of debt.

If you can’t do that? try refinancing your house (even if interest rate is 1% higher than current rate)…better to do that then decimate your 401k duing your prime earning years. In the next 10 years that 40k is gonna be around 100k and will be at 315 at age 67. If you refinance your house and amortize the payments over the next 25 years you’ll still have it paid off by the time you hit 67 and won’t have killed your retirement. I’m being realistic here…certainly the extra payment made to the home loan COULD be invested and twist the benefit around but most likely you wouldn’t and would spend it. So the benefit still lies in the forced saving of the 401k.

]]> By: Michael http://www.1retirementplan.com/what-is-the-penatly-for-taking-out-early-retirement/comment-page-1/#comment-770 Michael Mon, 19 Jul 2010 19:41:13 +0000 http://www.1retirementplan.com/what-is-the-penatly-for-taking-out-early-retirement/#comment-770 This depends on the type of retirement account. If you are talking about a traditional IRA, 401K, or 403B then you will be assessed a 10% penalty and the money will be taxed as ordinary income. If it is a Roth IRA you can take it out tax free (you already paid taxes on this money). You can also take out a loan from your retirement account. However, this must be repaid with interest. I would consult with the plan administrator or your financial adviser. This depends on the type of retirement account. If you are talking about a traditional IRA, 401K, or 403B then you will be assessed a 10% penalty and the money will be taxed as ordinary income. If it is a Roth IRA you can take it out tax free (you already paid taxes on this money). You can also take out a loan from your retirement account. However, this must be repaid with interest.

I would consult with the plan administrator or your financial adviser.

]]> By: jim06744 http://www.1retirementplan.com/what-is-the-penatly-for-taking-out-early-retirement/comment-page-1/#comment-769 jim06744 Mon, 19 Jul 2010 19:15:30 +0000 http://www.1retirementplan.com/what-is-the-penatly-for-taking-out-early-retirement/#comment-769 there is at least an excise tax of 10% plus immediate tax on distribution amounts. You can avoid tax for certain emergencies including college tuition i think. Go to smartmoney.com or money.com or other similar sites and do search, there are tons of articles on this topic there is at least an excise tax of 10% plus immediate tax on distribution amounts. You can avoid tax for certain emergencies including college tuition i think. Go to smartmoney.com or money.com or other similar sites and do search, there are tons of articles on this topic

]]>