Has Anyone Cashed Out Their 401(k)?

[One300wsm]

There’s going to be a lot of poor future 65 year olds on this forum

When you’re 65 who cares, your days are numbered if you even make it to 65.
About 15% to 20% of people who reach age 65 will die before age 80, meaning a meaningful portion of retirees pass away within their first 15 years of retirement. The
average age of death for men (life expectancy at birth) is approximately 76.5 years in the United States.
How many are physically fit to actually do anything is a smaller percentage.

 

[Andrew12gauge]

When you’re 65 who cares, your days are numbered if you even make it to 65.
About 15% to 20% of people who reach age 65 will die before age 80, meaning a meaningful portion of retirees pass away within their first 15 years of retirement. The
average age of death for men (life expectancy at birth) is approximately 76.5 years in the United States.
How many are physically fit to actually do anything is a smaller percentage.

What isn’t factored in by many in that life expectancy is the number who die incredibly young and thus bring down the average. You’ve got an 80-85% chance of making it to 80 if you do make it to 65


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[scaast]

Your age and the size of your 401K are key factors. I'm assuming you mean draining it...rather than starting to make withdrawals at a reasonable and prudent pace. If you don't have much in there...then it probably doesn't make much of a difference in the long run...however, if you have a significant amount of money in your 401K, then you are likely making a serious mistake by draining it. If you are talking about withdrawals, there are several ways you can take money out without paying an early withdrawal penalty...you won't ever avoid taxes on it though. If you are 55 or older, look into IRS Rule 55 regarding 401K withdrawals from your last employer on or after the year you turn 55...no penalty.

 

[Marbles]

Would you borrow money at 30% - 40% interest? when you cash out your 401k you lose 30% - 40% to taxes and fees.

There is almost no scenario where cashing out your 401K makes any sense

30-40% APY is vastly different than 30-40% off the top.

40% of $10K is a $4K cost to access $6k.

So $6K with a 5 year term at 22% interest would be the equivalent. 12% interest for a 10 year term. Or equivalent to 4% interest on a 30 year term (for example if it was used to pay down a mortgage).

Plus, there is security in having lower monthly expenses.

Not saying people should do it, but it is not as dumb as some make out.

Of course, if the market crashes, withdrawing now could lock in profits. If the market keeps going up, then obviously the losses are bigger over time.

 

[Traveler]

I’ve never done it, but old enough (not that old) to know I would regret it and it is an in-extremis option only. If it is for any bit of a want it is a bad idea

 

[Oregonmuley]

I did at age 40 but man was it worth it - it bought me an ex-wife

 

[One300wsm]

What isn’t factored in by many in that life expectancy is the number who die incredibly young and thus bring down the average. You’ve got an 80-85% chance of making it to 80 if you do make it to 65


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I can live off my social security when I’m old and crippled. If you’re 65 and your not paid for you have bigger problems than a 401k decision, You better pull it out and pay for your house. Me personally I will continue to work until I’m no longer healthy enough to go on physical vacations, like hunting, fishing, jet skiing, snowboarding, skiing and dirt biking and so forth retirement for me isn’t mowing the yard watch NCIS. Wealth is memory’s, not how much money you leave behind when you die. Don’t be a glutton like George Soros wealthy and miserable and try to make the world miserable while setting on your ass.

 

[Caseknife]

When you’re 65 who cares, your days are numbered if you even make it to 65.
About 15% to 20% of people who reach age 65 will die before age 80, meaning a meaningful portion of retirees pass away within their first 15 years of retirement. The
average age of death for men (life expectancy at birth) is approximately 76.5 years in the United States.
How many are physically fit to actually do anything is a smaller percentage.

But when you make it to 65 and you only have your SS check to sustain you, not doing much even if you are healthy as an ox.

 

[Ross]

Contributed to one for 30 years. Never in my wildest dreams thought about anything other than stacking more into it.
Unless a dire situation and if anything substantial, you will regret it later.

 

[MBNAZ]

I’ll retire in about 4 years, at 50, and plan on spending it all within 15 years on hunts, vacations etc. House will be paid off and after 65 or so I figure I’ll be happy to nap in my chair, work in my yard and reminisce looking at all the mounts on the wall. If I haven’t spent it all maybe I’ll buy a big a$$ truck and a boat. My kids know when I die there won’t be much left to split up and if I live too long I might start borrowing money again.
I know this doesn’t help answer the question regarding 401k but I have worked and spent responsibly for 26 years so that I didn’t have to later in life.

 

[CorbLand]

This is like the third or fourth thread this guy has started like this. Dudes just a troll and those are best left to starve.

 

[FrankieP1988]

my buddy did last year when the company he worked for sold and the new company he started working for didn't offer a 401k. He ended up not looking into how bad he would be hit with taxes, ended up owing like $10k lol

 

[z987k]

I cashed out a 401k that I had with a former employer, the financial institution that it was with while with the employer was already not great, the one that it got sent to once I left the job was probably the worst I’ve seen, the year is 2024, this institution had a website straight from the 1990’s and no app, all of my money was sitting in a savings account essentially earning nothing and their website was so dysfunctional I couldn’t make a purchase of stocks, etfs or mutual funds. I got frustrated and pulled it all out figuring long term it was worth whatever penalty I had to pay to get the money back into the market. We also just happened to adopt our son in 2024, unbeknownst to me until tax time, adoption is an event that gets you an exemption on the early withdrawal penalties for a 401k. That one worked out in my favor


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You're the second person to rationalize a very stupid decision this way. You can roll a former employer 401k into your own ira or to your new employers 401k. Theres no taxes or penalties to do so.

Its not like this is a secret either.

 

[One300wsm]

But when you make it to 65 and you only have your SS check to sustain you, not doing much even if you are healthy as an ox.

My SS at 65 right now is more than enough to live on. I’m not retiring at 65 unless I’m not physically fit. I will continue to work to pay for my hobbies basically the only reason I’m working now. If I’m not physically fit I don’t need much to live on. I’ll sit around the house like 75% of the fat retired people do, that sounds fun.

 

[Cowbell]

There’s going to be a lot of poor future 65 year olds on this forum

Half of us won't make it to 65

 

[One300wsm]

I’ll retire in about 4 years, at 50, and plan on spending it all within 15 years on hunts, vacations etc. House will be paid off and after 65 or so I figure I’ll be happy to nap in my chair, work in my yard and reminisce looking at all the mounts on the wall. If I haven’t spent it all maybe I’ll buy a big a$$ truck and a boat. My kids know when I die there won’t be much left to split up and if I live too long I might start borrowing money again.
I know this doesn’t help answer the question regarding 401k but I have worked and spent responsibly for 26 years so that I didn’t have to later in life.

That’s what I’m talking about, good for you.

 

[Cowbell]

I took mine out during Covid under the hardship opportunity with that. Paid a 10% penalty and used it to scale my business. That money has earned me a 68% IRR sense. No regrets.


Retirement is for those of you that don't do what you love for a living. I have no desire to retire but if I get the opportunity to slow down it's gonna be because I do what I love and I can run my business passively. I hope each of you can find that. That retirement savings only gonna do any good for about half of you.

 

[Jason Snyder]

Retirement is for those of you that don't do what you love for a living

That is an incredibly close minded take, which you are certainly welcome to as your opinion. I love what I do and I am also very much looking forward to retirement.

 

[180ls1]

Half of us won't make it to 65

How'd you come up with that number?

I know a married couple has a 50/50 change of one spouse making it to 90.

 

[Jason Snyder]

(assuming its not from a spouse) You can't convert an inherited IRA, you can indirectly do an inherited 401k. But it triggers taxes and has to go to a inherited roth IRA which still needs to be depleted in 10yrs. So your option is take a big tax hit to convert it to a inherited Roth IRA but then it has tax free growth till the 10yr mark (that may or maynot offset that taxation). Or you just take it out as income over the 10yrs and invest it.

Regardless you can't directly get it into your own Roth IRA as far as I'm aware.

Roger. I’m not smart at all of the different options. We pay a guy who is.