Has Anyone Cashed Out Their 401(k)?

[TheCougar]

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

I just sold my children to a sweat shop in Bangladesh. Not only do I get to go on a sheep hunt now, but I also reduce my near term expenses because someone else pays for room and board.

 

[go_deep]

I just sold my children to a sweat shop in Bangladesh. Not only do I get to go on a sheep hunt now, but I also reduce my near term expenses because someone else pays for room and board.

Do you get to keep your tax deductions, or does the sweat shop get to claim them now?
Asking for a friend...

 

[TheCougar]

Do you get to keep your tax deductions, or does the sweat shop get to claim them now?
Asking for a friend...

I lost the tax credit, but gained a sheep hunt. It’s a net gain.

 

[Hunter26]

Yep, my brother in law’s dad is 78 never did anything with his retirement money. Had to go in a nursing home 2 years ago. They took all his 401k retirement money and now they selling his house and belongings. Thats why you save for retirement so you can pay someone to wipe your . The problem this day and age people live to long. Big Phrama has so many drugs out to keep you alive. So the government can suck every last penny out of the poor soles to stupid/greedy to spend it or to stupid/greedy to have a trust set up.

I get your point about using it (enjoy what you have worked for) and not loosing but I do think there are avenues to set up to ensure the government doesn't take it all if the time comes for the nursing home. For myself, I have four kids and do find value in leaving them something when the times comes. It can be a balancing act of spending it while young but not having it hang over your head that you won't be able to afford a comfortable retirement.

One other thing I keep seeing in the comments is that people keep living longer. According to google the average life expectancy in the US has decreased since 2019. I am sure some of it is covid related but I do think it is a trend.

 

[go_deep]

 

[go_deep]

 

[Hunter26]

View attachment 1076238

They look so happy!!!

 

[Marbles]

You can lock in market gains without tax consequences. No one says you have to take a distribution.

True to form, there is soooo much bad advice on this forum. As per usual when it comes to financial topics here.

Some advice…. If anyone is uninformed enough that they are compelled to ask financial questions on this forum, do yourself a favor and don’t. Just don’t. Unless you possess a world class BS filter, you could wind up with some really bad advice. Consult a professional instead.

Not sure I get what you are saying.

If you leave $10k in at 4% after 30 years, assuming $0 contributions/compound weekly you have $33,185.

Assume you have $200k mortgage with 4% interest, 30 years total cost principal+interest = $343,739.

Assume you use the $6k to pay down principal so $194k mortgage with 4% interest, 30 years total cost principal+interest = $333,426

Difference $10,313

So leaving your money in the $401k is $22,872 better.

The post I quoted compared withdrawing to taking out a loan at 30-40% interest. It is not.

Funny how people can't understand the difference between pointing out flawed logic and arguing that something is better. If you must defend bad arguments that support your position, you don't really know enough to give good advice (even if that advice turns out to be correct).

 

[pods8 (Rugged Stitching)]

For myself, I have four kids and do find value in leaving them something when the times comes.

Leaving money to kids / inheriting from parents seems like odd timing to me. If you have planned for your own retirement and your parents live a decent age and assuming they didn't have you at a later age by the time you would inherit anything you're likely already squared away. Maybe it accelerates things a few years? I suppose its a safety net for those kids who haven't saved adequately (or at all?) for themselves.

Families are so weird but if truly thinking about the family collective getting money into retirement accounts of grand kids is where there would really be quality of life improvements imho. IE that would be how to help family truly retire early and maybe enjoy more healthy life out of the workforce.

 

[Aussie Dan]

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

Reminds me of an old joke.
Why are divorces so expensive?
Because they're f**king worth it!!!!

 

[Hunter26]

Leaving money to kids / inheriting from parents seems like odd timing to me. If you have planned for your own retirement and your parents live a decent age and assuming they didn't have you at a later age by the time you would inherit anything you're likely already squared away. Maybe it accelerates things a few years? I suppose its a safety net for those kids who haven't saved adequately (or at all?) for themselves.

Families are so weird but if truly thinking about the family collective getting money into retirement accounts of grand kids is where there would really be quality of life improvements imho. IE that would be how to help family truly retire early and maybe enjoy more healthy life out of the workforce.

You are right about the timing being a little weird. It can be more for the grandkids as much as anything. I do think my mom enjoys/loves her grandkids as much as she does her own. So the satisfaction of leaving something behind doesn't change much. With that said I saw my parents get a little money and it afforded them an opportunity to buy a couple toys they probably wouldn't have been able to purchase otherwise. Again, for me it is a lot about balance, I want to enjoy life now, enjoy my kids while they are young but also be able to live comfortably in retirement and hopefully be able to retire earlier than the typical 65. If those things happen then more than likely I will be able to pass on something to my next generation.

 

[Marbles]

Something amusing to me about early retirement is that it is associated with early dementia. You have to be careful as there are all sorts of confounders there, but for those who plan to retire early, have a plan to stay engaged as well.

 

[mtnbiker208]

I am so glad i have already paid the sheep bug.

 

[pods8 (Rugged Stitching)]

You are right about the timing being a little weird. It can be more for the grandkids as much as anything. I do think my mom enjoys/loves her grandkids as much as she does her own. So the satisfaction of leaving something behind doesn't change much. With that said I saw my parents get a little money and it afforded them an opportunity to buy a couple toys they probably wouldn't have been able to purchase otherwise. Again, for me it is a lot about balance, I want to enjoy life now, enjoy my kids while they are young but also be able to live comfortably in retirement and hopefully be able to retire earlier than the typical 65. If those things happen then more than likely I will be able to pass on something to my next generation.

I've witnessed a mixed bag, I'm from divorce so I have two sets of parents to observe as well as the inlaw side.
-One set of mine didn't inherit much, didn't plan well and I don't expect there to be any inheritance.
-Other set of mine didn't inherit much, but has planned/safe well and has been living off pension/SS/savings until they just (last year/this year) hit RMDs on the IRA/401k/457 accounts they've never touched. If they live long they'll work through it but they are assuming they'll pass on a decent amount of money. We have never discussed specifics and I don't ask or plan for it.
-One set lived lean and money was tight but then they got a notable inheritance which improved their quality of life and they have put some decent funding into the grand kids 529s which is super helpful in the near term. They probably will also pass on some money.

I think as a baseline you gotta get yourself squared away. But if you know you're solid and are going to have an excess in my observation getting that money into the kids 529s has been super helpful for them which in turn has allowed me to not divert from putting into my own retirement (so helpful to me also). I think again if there is capacity getting money started in grand kids (or your own kids) Roth accounts when they start working (they need earned income) and aren't thinking about saving like that could be massive in their future (lotta years of compounding tax free growth).

My kids only get 75% of their allowance, the other 25% has been "taxed" all along into a high yield savings account. We haven't decided if we'll keep that as a safety net fund or put it into a Roth.


That said that is from my own perspective of planning to take care of myself and so far being successful in making progress towards that. I have siblings that probably badly need an inheritence.

 

[SurfAMHuntPM]

Fascinating.
never did , almost took a rollover from my first 401k to pay for a graduate degree. decided against it.
I’m 48 and that is now 130k sitting in a boring target date fund I’ve never touched.
I am debating pulling 10% from a brokerage account for a big trip. I keep a percentage in money market and bond etf, to DCA into ETFs or buy deals when market dips like April 25’ and March of this year. ( even though it’s way more efficient to just one time buy ETFs)
Hope to retire early/ fine line w increasing quality of life and dropping dead a year into later retirement

 

[skipper907]

I did cash out a 401k back in 2008 or 09 when the sky was falling with the market. I also bought Facebook on the IPO and sold it when it tanked in 6months, If I had held on it would have a 700% increase on my purchase but you live you learn. The 401k wasn't a lot maybe less than 20k. Knowing what I know now about investing I wish I did not do it but I have been blessed to learn and maximize my 401k and other accounts now.

 

[Ross]

Anyone in the market back in 2008 will recall the world is crashing lingo. So many co workers pulled out of the market…told them NO don’t touch or look. BUY more…we lost on paper 100s of thousands. You don’t get opps like that very often historically be in for the long haul for the it was also very good in the mountains so many could not afford tags Idaho had them on discounted rates on tag 2

 

[go_deep]

 

[Traveler]

The post I quoted compared withdrawing to taking out a loan at 30-40% interest. It is not.

Funny how people can't understand the difference between pointing out flawed logic and arguing that something is better. If you must defend bad arguments that support your position, you don't really know enough to give good advice (even if that advice turns out to be correct).

My comment wasn’t about logic or arguments. I simply asked what you were trying to say with your math in the context of you mentioning a mortgage.

 

[CJohnson]

You guys know that you can move a 401k out of an employers sponsored plan if you leave that job, right? Like you can go to any major financial provider (vanguard, etc) and just open an IRA and move it to there.

I’d be interested to hear what you pros think about structuring retirement income streams to minimize taxes once RMD’s roll around.