Posted on 03/09/2009 11:03:12 AM PDT by xlib
Is anyone talking about waiving the 10% penalty for early withdrawal, and possibly some help on the tax liability? I've heard no discussion of this, and I'm not sure of the possible unintended consequences, but it's personal now, since I'm going to need to do it soon to keep paying my bills. I've already borrowed the max amount, so that's not an option. My business is home construction related, so no banks are interested in loaning me money, and I don't want more debt anyway. Anyone?
I also would be interested in the answer to this.
Haven’t heard anything on this; in fact, I’d expect it to go the other way if they do anything, considering there was talk among the Dems last year about taxing 401ks.
I doubt they will consider it a hardship. they usually want proof of medical bills or something.
The plan administrator might go for it, but the IRS won’t.
Clark Howard, the other day on Hannity, gave some interesting advice.
Move/change your qualified (401, 403, IRA) money to non-qualified securities. Take the 10% penalty, but DO NOT SELL your securities (or sell and rebuy, I guess, does the same). You’ll take a 10% tax penalty at the bottom of the market, keep the stocks, then you’ll have full control of them as the market recovers.
I don’t see that happening. That early withdrawal penalty is probably the main reason the stock markets haven’t completely collapsed already. If they allowed people to pull out of 401(k) plans with no penalty, then you’d really see the bottom fall out!
All I’ve done is move my 401K savings from 8% to the company matched 6%.
I will reduce it further if my company stops matching, but I have not heard they are considering that.
It would not surprise me if there is some movement to remove that penalty; but at this point I have seen nothing from this President that he cares for anyone who has any money. Make sure there isn’t something like that pending before you pull it out.
Besides the penalty and tax, what about the fact that the market is in the gutter? Talk about locking in your losses.
That’s exactly what Obama wants you to do. Lose your job, pull your money out of the market, pay huge taxes and then rely on the governemnt for your day to day life.
They want our 401k, they will not give us easier access to our money. Eventually, they’ll roll them all over to t-bills and take over administration of the funds.
10% penalty or not, if I get laid off, I’m raiding my 401k to pay off my mortgage.
Sooner or later the Dems are going to start coming for our 401(K)s. At that point you will wish you just paid the tax on an early withdrawl and recouped something.
Unintended consequence, we get no earned income credit for taking out $4,500 in IRA/401K to get by while unemployed because it is considered “Investment income”. However, the money had only been in the accounts for less than 2 years and 95% of the amount was money I had put in myself, so I while I can see taxing me on the income (since it was taken out pre-tax), I don’t see how every penny can be considered “investment income”, it was EARNED INCOME.
This has made me hesitant to even bother trying to build up a portfolio again since the losses in the market AND once it goes into the account it isn’t considered earned income anymore?
That’s what happened to us months before Obama was elected.
Not saying it’s Bush’s fault, but that the economy was heading this way before November.
Interesting.
That makes no sense whatsoever. You’re paying taxes on the FULL amount you take out, PLUS the 10% penalty.
PLEASE check out Dave Ramsey’s site.
Keep your home, food, clothes, transportation. THEN, work on the rest IF YOU CAN!
Why pay off your mortgage when the Feds will pay it off. ;-)
If people sell and pay the penalty you may want to move it out, pay the penalty then sell and you at least get a $3,000 a year tax loss carryfoward.
Being laid off is a “hardship” under the rules, if I recall correctly.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.