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.
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?
PLEASE check out Dave Ramsey’s site.
Keep your home, food, clothes, transportation. THEN, work on the rest IF YOU CAN!
A complete cash out is what alot of people are doing. They’ve seen their 401’s lose %50 percent or more. Credit, car loans, food and just keeping their homes for a little while longer until they can sell is on their minds. From what I understand the penalty is taken out of the cash out, then you pay the IRS the taxes which the 401k company does for you. Then you report it on your taxes. I may be wrong. I haven’t concidered it ......yet.
Be careful about withdrawing what’s left in your 401K. If I’m understanding correctly, you have a loan against your 401K. Withdrawing may trigger some provision that makes the loan due and payable immediately. Maybe not, but read the fine print. You should also read your plan’s rules for hardship.
If you withdraw, they are going to prorate your withdrawal between contributions and earnings, and the earnings will be taxed as ordinary income in addition to the 10% penalty. The penalty winds up being much more than 10% in the long run.
cash out gives yu a big tax and penalty hit, but so do loans from your 401K. My understanding is that your loan is taxes coming out, then when you pay it back, you are paying out of post-tax income, so you get douvle-peanlized.
401K - too many rules and too few benefits, it seems.
Proof of hardship and and an exact dollar amount for the hardship. Plus all the penalties and taxes. If you owe on a loan that will also come due.
Best to call your 401(k) helpdesk.
I’d put it in a low interest CD before I’d cash in. Better to make 2 or 3 percent than lose 10%. I don’t think there are too many financial advisors out there who would recommend and early withdrawl.
I think you have to be in danger of foreclosure and/or have to demonstrate that you have NO other means to sustain the expenses. I believe you will have a 10% penalty, regardless, plus tax on the ordinary income. If you terminate from your employer, you will be expect to repay loans from the plan immediately, or those will also be subject to income tax and penalty.
Read here: http://www.401khelpcenter.com/hardships.html