Posted on 11/29/2012 2:59:09 PM PST by DontTreadFred
Do you like the 401(k) systems? Ray Fisman says that the Fed should end the 401(k) because it is not helping people to save more money - http://www.slate.com/articles/business/the_dismal_science/2012/11/fiscal_cliff_401_k_s_and_iras_cost_the_government_billions_should_we_get.single.html. While I couldnt disagree more with the reason Fisman wants to end the 401(k) system, I do think it isnt helping average Americans. I think people would build up better savings by allowing pretax dollars to be used to pay down mortgage debt?
Obviously, my monthly budget has little wriggle room in it, but my balance sheet looks better every month.
Another benefit is the ability to borrow from it, and paying it back at low interest rates. I don't recommend it for frivolous stuff, of course, but it means I don't have to go to my banker to be told no for a home improvement project.
Neah.
They are going after 401Ks and IRAs because that is where the money is - trillions of dollars just waiting to be “invested” by the Federales.
Forget that the money is there, and roll it over to an IRA. Long term, that is the smartest decision (depending on federal shenanigans).
It sounds like you are young, and don't have a large rainy day fund.
IF you chose to cash in the 401(k), do it now. Do not wait until January. You will pay a penalty of $900, which you can treat as just another investment risk. It basically offsets the employer match.
You will pay the 20% in taxes up front, which will help you on your 2012 taxes. File your taxes as close to Jan 16 as you can, which we think will be the first day that the IRS accepts returns.
You will either: 1) get most of your 20% back, or 2) not get whacked by owing taxes on this years’ income.
Try not to spend it if you do pull it out, and use it to start a new rainy day fund if you no longer want to participate in this form of retirement savings.
Well as for age I’m getting up there lol. I’m 49 and I have about 9000.00 in a 401K which I have a 1,700 loan I took out about 4 years ago when I fell ill. Now I have been recently laid off with that outstanding loan. I got my severance lump sum pay of 6000.00 which after paying my rent and bills I have about 4000. So far no check from unemployment even-though I filed already.
I am upset but I try not to think of it but when my father me and my brother inherited 100,000.00 Well all that money is gone since my brother used it up leaving me very little. He used it to buy a lexus with a camera in the back to see who is behind and lived in a high price area yet he has no job. He relied on father’s money to live on. Yep he is an Obama supporter, and now I am making him give money. Right now he can’t help me since he is struggling.
What gets me upset is that if I still had that money I would not be wanting to cash in my 401K. That is why I am considering to do that.
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