Has Anyone Cashed Out Their 401(k)?

[One300wsm]

No, look up the rule of 55. It's put in place to start withdrawals on your 401k penalty free, it would be the same as starting at 59 1/2 just earlier.

There is some set prerequisites you would have to qualify for but most company's offer this.

Crucial Rules to Qualify
To avoid the 10% penalty, your situation must meet the following criteria:

• Separation of Service: You must leave your job (whether you retire, quit, or are laid off) in the year you turn 55 or older.
• Current Employer's Plan: The Rule of 55 only applies to the 401(k) associated with the job you are leaving.
• Funds Must Stay in the Plan: You cannot roll over your current 401(k) into an IRA or another employer's plan. If you roll the funds into an IRA, you will lose the ability to use the Rule of 55.

 

[pods8 (Rugged Stitching)]

Crucial Rules to Qualify
To avoid the 10% penalty, your situation must meet the following criteria:

• Separation of Service: You must leave your job (whether you retire, quit, or are laid off) in the year you turn 55 or older.
• Current Employer's Plan: The Rule of 55 only applies to the 401(k) associated with the job you are leaving.
• Funds Must Stay in the Plan: You cannot roll over your current 401(k) into an IRA or another employer's plan. If you roll the funds into an IRA, you will lose the ability to use the Rule of 55.

Those aren’t high barriers to plan around, if you want to exercise this allowance.
1) yes you need to work till 55
2) you have decades to confirm your employer plan allows this
3) yes from 55-59.5 the non/withdrawn funds need to stay in that account. Once you clear 59.5 you aren’t under rule of 55 anymore.

 

[Jstumbaugh]

I'm banking on the rule of 55. My retirement calculator shows that I should have enough to fund my retirement comfortably by 51. My wife will retire at 55 with a pension a year after I do.

 

[ScottinPA]

For anybody looking for a source on whether you can retire, look at moneybee.com. I'm sure there are others out there and maybe better but this seems to do a good job. My original plan was 62 but look at the site with conservative assumptions, I'm pretty sure I could retire now at 57.

I've never withdrawn from my main 401K. I had a small one from a short employment that I cashed out to pay some debts otherwise I've rolled them into the current acct. Instead of cashing out to go on hunts I've just contributed less and did out of state hunts about 2-3 years for the past 20 years.

 

[TheCougar]

I can’t fathom the logic behind the guys on this thread counting on SS. When I am saving for my retirement, I plan on ZERO SS. The federal government can’t run a budget - hell they haven’t had a real budget for as long as I can remember - and the SS program can’t meet its obligations past 2030ish (don’t the exact date). I make enough money that I’m almost certain that when they finally triage the SS program, I won’t get much, if anything, and I’ll just end up funding SS and Welfare for people like the OP who apparently have little to no financial sense and just want to “live in the moment”. I sound like a boomer, I know. I swear I’m not. I never, ever, ever want to put my faith or welfare or future financial security in the hands of an incompetent bureaucracy.

 

[Dos Perros]

There are lots of opportunities for margin planning. We count on SS because it's something I can discretely calculate. The only uncertainties there are inflation rates and if the program will still be around (I think it will). Our margin is inheritance. We count on zero, but I think there is a high likelihood it could be significant.

 

[One300wsm]

I can’t fathom the logic behind the guys on this thread counting on SS. When I am saving for my retirement, I plan on ZERO SS. The federal government can’t run a budget - hell they haven’t had a real budget for as long as I can remember - and the SS program can’t meet its obligations past 2030ish (don’t the exact date). I make enough money that I’m almost certain that when they finally triage the SS program, I won’t get much, if anything, and I’ll just end up funding SS and Welfare for people like the OP who apparently have little to no financial sense and just want to “live in the moment”. I sound like a boomer, I know. I swear I’m not. I never, ever, ever want to put my faith or welfare or future financial security in the hands of an incompetent bureaucracy.

If they can’t afford to pay their SS obligations your money will be worthless also. Everyone including me that has a 401k, Pension, Stocks and Mutual funds are playing with paper money. When goes bad it all will vanish, like thieves in the night. You’ll see stock brokers leaping from tall buildings, that’s never happened before lol. You better invest good bit of your money in tangibles something you can actually put your hands on.

 

[TheCougar]

There are lots of opportunities for margin planning. We count on SS because it's something I can discretely calculate. The only uncertainties there are inflation rates and if the program will still be around (I think it will). Our margin is inheritance. We count on zero, but I think there is a high likelihood it could be significant.

Fair enough… then my margin is SS. If I get it great, if not then we will still be okay. I would bet my retirement accounts that whatever SS I get will cost me more than it does currently, and will be less than I put into I and is promised in return.

 

[TheCougar]

If they can’t afford to pay their SS obligations your money will be worthless also. Everyone including me that has a 401k, Pension, Stocks and Mutual funds are playing with paper money. When goes bad it all will vanish, like thieves in the night. You’ll see stock brokers leaping from tall buildings, that’s never happened before lol. You better invest good bit of your money in tangibles something you can actually put your hands on.

Bitcooooooooooin!

 

[Weldor]

Interesting. Can't imagine being 30 now, the world will certainly be a different place when you are all 65 . Everyone's situation is different, don't know what is right for someone else just know what works for me.

 

[MallardSX2]

You better invest good bit of your money in tangibles something you can actually put your hands on.

More fear mongering.

What is your plan with that stuff since nobody will have any money to offer you for it? lol

 

[TheCougar]

If they can’t afford to pay their SS obligations your money will be worthless also. Everyone including me that has a 401k, Pension, Stocks and Mutual funds are playing with paper money. When goes bad it all will vanish, like thieves in the night. You’ll see stock brokers leaping from tall buildings, that’s never happened before lol. You better invest good bit of your money in tangibles something you can actually put your hands on.

It’s not that I disagree with you. I try not to think about that, because it keeps me up at night. But if that scenario happens, all bets are off and it’s Thunderdome. I do think this is probable: Social Security taxes are going to go up, payments will go down, and they are going to tie Social Security payments to Income. Between my military pension and my mandatory withdrawals from my IRAs, I think that’s gonna put me in an income bracket that the federal government tells me “Gee, thanks for playing the Social Security game, but your money is going to somebody else.”

 

[MallardSX2]

But if that scenario happens, all bets are off and it’s Thunderdome.

This - 1000%

 

[arrow179]

More fear mongering.

What is your plan with that stuff since nobody will have any money to offer you for it? lol

cash out and buy lots of gas and ammo!

 

[One300wsm]

Bitcooooooooooin!

Yea I would put my money in bitcoin

 

[Weldor]

It’s not that I disagree with you. I try not to think about that, because it keeps me up at night. But if that scenario happens, all bets are off and it’s Thunderdome. I do think this is probable: Social Security taxes are going to go up, payments will go down, and they are going to tie Social Security payments to Income. Between my military pension and my mandatory withdrawals from my IRAs, I think that’s gonna put me in an income bracket that the federal government tells me “Gee, thanks for playing the Social Security game, but your money is going to somebody else.”

Don't forget IRMAA.

 

[TheCougar]

Don't forget IRMAA.

Oh, I know… but thanks for pissing in my Cheerios this morning by reminding me all the ways the government rewards success and hard work!

 

[One300wsm]

More fear mongering.

What is your plan with that stuff since nobody will have any money to offer you for it? lol

Guess you missed your history class in school!! They never traded tangibles back in the day, you know before there was money or not much of it. Like gold!!! Pretty sure that’s why we have gold in the Federal Reserve. People have to much faith in the stock markets they fail quite often.

 

[Weldor]

Oh, I know… but thanks for pissing in my Cheerios this morning by reminding me all the ways the government rewards success and hard work!

Yea, it's a bummer for sure. Better plan that sheep hunt now before they want the money back

 

[Kauaihunter]

I cashed out when I left a company at 50 in 2021 because I already had a retirement account for my retirement which I just started drawing a pension from as of June 1 at 55. I did it because at the time, the IRS was waiving the 10% penalty because of Covid. I took an easier, less stress job which paid me about half of what I previously made. I used the 401k money to pay off a vehicle so I could take the new job and still live comfortably over the last 5 years. However, I got a surprise when I did my taxes in 2022 because the company I left didn’t check the right box on the payout forms. I saved enough of the money from the cash out that covered the additional taxes but it was still annoying.