Message Boards: Your Money with Personal Finance columnist Liz Pulliam ::
Find out what some of the best investors on MSN Money are picking in our I am trying to decide if I should cash out my 401K, and delegate my money in a
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I am thinking about cashing my $20,000 I have saved and reinvesting in bonds and in my company because I trust my entrepreneurship abilities more than I trust the government. Can I/Should I sell my 401K? I have had the 401K for about 18months-2 ::
At the risk of seeming redundant dont cash in your 401K. Many people make the mistake of rolling their 401k into the 401k account at a new employer.
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No, don't cash out. Penalties and additional tax could really hurt you. Plus, when the market is down, that's when you BUY... not sell. If anything, put more money into you 401K while the prices are all still low.
I'd roll it over into a Rollover IRA.
You would have to pay a 10% early penalty, plus federal income tax.
If you want more control over the money roll it over into an IRA at the fund company of your choice and you will have a lot more options without the penalties associated with cashing out.
And for the love of god, do not treat this as "free money" just because you feel like you didn't earn it. Money is money regardless of where you got it from and you will have to work just as hard to replace it if you lose it no matter its origin.
Let's see. You have to quit your job to get access to the money.
The money is then taxable income to you, PLUS a 10% penalty.
After taxes, you'd have $15,000 left. Then you put the money in bonds and whine further that the amount you paid is affected by the current interest rates. If the rates go up, the bond values go down.
Your choice.
leave the 401k alone.
You can if you are able to repay your company back with the interest.
You are gonna get beat up with fees, plus your 401K is invested in the market not in the government so I don't understand that statement.
If you have extreme faith in your business abilities then go for it, that's what the American dream is all about. I would recommend doing the following things first.
1) Find out how much you would actually walk away with if you cashed out.
2) Write a business plan that states how you will utilize that money and how long it would take to make that money back.
3) Do a reality check to see if in fact in this tough economic climate your new or expanded business will be viable.
What does the government have to do with your 401(k)? It doesn't direct your 401(k) investments.
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