Posted on 11/09/2009 7:34:12 AM PST by blam
Don't Do It! (Cashing Out 401ks)
Monday, November 9. 2009
Posted by Karl Denninger in Consumer at 08:44
Grrrrr....
As the last of his severance pay dwindled away in March, Brad Cleghorn of northwest suburban Marengo cashed out his 401(k) plan in order to pay his mortgage and feed his family.
Cleghorn is not alone. A Hewitt Associates study shows that 46 percent of workers with 401(k) plans who lost or switched jobs cashed the plans in, a trend that could lead to serious problems when younger generations of people working today reach retirement.
That's not the real problem folks.
Let me make this crystal clear:
Your 401k or IRA has near-absolute protection in a personal bankruptcy. As a qualified retirement plan it cannot be seized by creditors if you file a Chapter 7 or Chapter 13.
The absolutely worst thing you can do is to cash out those plans. This is not just about sabotaging retirement, although that's serious.
This is the "human face" on the games our government has played with bailing out banks and other big financial institutions. You, "Joe Six Pack", hasn't been helped at all, and bill collectors and others will even "suggest" that you cash in retirement funds so you can pay them!
Don't do it!
Go see a qualified CPA and/or Bankruptcy Attorney. Yes, they'll charge you $100 or so to spend a half-hour going over your circumstances and personal situation.
[snip]
(Excerpt) Read more at market-ticker.denninger.net ...
As a qualified retirement plan it cannot be seized by creditors if you file a Chapter 7 or Chapter 13.
The lack of money and financial management among the US population is terrible. It used to be taught in schools and our parents used to be fruggle. No new cars..cash for cars...20% down on the house and no refi or second since the goal was to own it outright for retirement or sooner.
Save money every week..prepare for that strike that could come. Etc. Our parents were raised during the depression.
They didn’t have 401k’s.
The Rats will use this Rat induced ignorance to take over all retirement plans and Nanny state those. That is the only fix they want for SS.
The question is not “Can you get a job?”. The question is “How far are you willing to go to get a job?”
They called my mother an idiot for cashing hers out 2 years ago. Today she’s unemployed and living in a house that’s paid off.
He's held off of his retirement savings but has been told by social services here that he cannot get help as long as he has resources - meaning the 401(k)& retirement savings.
He had to quit college due to inability to pay. What are people supposed to do?
“Your 401k or IRA has near-absolute protection in a personal bankruptcy. “
Pfffft. Your 401k has little protection from Democrats looking for money to spend.
If I were to lose my job, and it was a choice between keeping the 401k or keeping the house, I’m cashing in the 401k to pay off my house.
I expect at some time in the not too distant future, Washington will take some or all of my 401k. After all, it’s not fair that I have money in a 401k and some low life from a protected group doesn’t.
Spred yo welf.
ALL the way BACK TO TEXAS!!!
The question is, what will the taxes on it be when you have to pull your money out?
At the moment, what you take out will be taxed at your rate plus a penalty. In 10 years, will the basic tax rate be more than that? Maybe. Even next year, the taxes + penalty will be higher than it is now.
Not correct. You can be made to sell your house if you have too much equity in it.
Worse than living on the street with kids and wife?
How do you keep your paid-off house if you have no income ? What do you use to pay property taxes and keep the lights and heat on and food on the table ?
No, you’d sell the house and find a place to rent that’s a lot cheaper.
WHAT CAN YOU KEEP IN BANKRUPTCY?
•Most people do not lose any of their belongings in bankruptcy. The end goal of bankruptcy is to get you back on your feet financially. Therefore, your basic necessities are protected in bankruptcy, so as to help you re-establish yourself.
•The equity in your home and most of your personal belongings will, in all likelihood, be protected in bankruptcy.
•The exemptions (the bankruptcy law which protects your assets) are very complicated and you should consult an attorney to maximize the protection that you are afforded under Bankruptcy Law.
If there was a house to sell
“How do you keep your paid-off house if you have no income ? What do you use to pay property taxes and keep the lights and heat on and food on the table ?”
In my case, I assume that a job can be found, even if it doesn’t pay well. If my month bills don’t include a mortgage payment, I don’t have a lot to pay then.
Not to mention that the withdrawel is taxed as a dividend profit (which means you cannot file earned income credit on your tax return) if it’s over a certain amount even if you are only withdrawing what you put in. So if I put in $4000, and withdraw $4000, no money has been made in the stock market, that amount is only what I would have taken home as INCOME if I never put it in the 401K, it’s counted as PROFIT.
“Your 401k has little protection from Democrats looking for money to spend.”
The article is obviously written by self-serving people in the financial services industry who are witnessing a run on the monies they control by people opting to cash out now.
The run will turn into a first-rate panic once the American public realizes the liberals are after the 401ks and IRAs to use for their spending programs.
I am 59 1/2 in 10 short months and believe me I will cash out as soon as it happens.
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