Cash out my 401k?

[Elwar]

With the amount of debt our nation has, they'll eventually start eyeing our 401ks even MORE than they have in the past.

I was considering cashing out my $100k 401k.

Possibly on my way out of the country...

What would be the ramifications of cashing it all out?

 

[Original_Intent]

1. They will not allow it if you are still employed thru the company that the 401(k) was contributed under. Only if you can prove a hardship, such as foreclosure or medical expenses.
2. If you are able to get it, they will do regular witholding for taxes as well as a penalty (either 10% or 20%, I forget) That's just an early withdrawal penalty, and unless you roll the money into a qualified retirement account of some kind, that's gone.

That being said, if I did not have to quit my job to get mine, I would cash out and take the penalty. One bad thing is all of that 100K is treated as income for the year it is taken, so you will likely be taxed pretty steep on it.

 

[Seraphim]

Playing ransom with people's savings and investment...how very moral of the State.

1. They will not allow it if you are still employed thru the company that the 401(k) was contributed under. Only if you can prove a hardship, such as foreclosure or medical expenses.
2. If you are able to get it, they will do regular witholding for taxes as well as a penalty (either 10% or 20%, I forget) That's just an early withdrawal penalty, and unless you roll the money into a qualified retirement account of some kind, that's gone.

That being said, if I did not have to quit my job to get mine, I would cash out and take the penalty. One bad thing is all of that 100K is treated as income for the year it is taken, so you will likely be taxed pretty steep on it.

 

[psi2941]

1. They will not allow it if you are still employed thru the company that the 401(k) was contributed under. Only if you can prove a hardship, such as foreclosure or medical expenses.
2. If you are able to get it, they will do regular witholding for taxes as well as a penalty (either 10% or 20%, I forget) That's just an early withdrawal penalty, and unless you roll the money into a qualified retirement account of some kind, that's gone.

That being said, if I did not have to quit my job to get mine, I would cash out and take the penalty. One bad thing is all of that 100K is treated as income for the year it is taken, so you will likely be taxed pretty steep on it.

+1

 

[Jeez]

As much i love paranoid speculation if they are going to take 401k they can also sieze bank accounts, your safe lockers etc why not just put all the money under the mattress ...

 

[VBRonPaulFan]

1. They will not allow it if you are still employed thru the company that the 401(k) was contributed under. Only if you can prove a hardship, such as foreclosure or medical expenses.
2. If you are able to get it, they will do regular witholding for taxes as well as a penalty (either 10% or 20%, I forget) That's just an early withdrawal penalty, and unless you roll the money into a qualified retirement account of some kind, that's gone.

That being said, if I did not have to quit my job to get mine, I would cash out and take the penalty. One bad thing is all of that 100K is treated as income for the year it is taken, so you will likely be taxed pretty steep on it.

it's a 10% penalty. and if he's planning on leaving the country, the tax ramifications aren't really relevant.

 

[Corydoras]

1. They will not allow it if you are still employed thru the company that the 401(k) was contributed under. Only if you can prove a hardship, such as foreclosure or medical expenses.
2. If you are able to get it, they will do regular witholding for taxes as well as a penalty (either 10% or 20%, I forget) That's just an early withdrawal penalty, and unless you roll the money into a qualified retirement account of some kind, that's gone.

If it's a ROTH 401(k), then you can withdraw the amount that you put in without any penalty or withholding at all. You pay taxes and penalties on any gains. So if you put in $90k and it went up to $100k, you can withdraw $90k perfectly free, and then you pay taxes and penalties on the remaining $10k.

I dunno, Elwar, I am concerned about this, too, but I think the government will find it easier to just print money rather than to confiscate retirement accounts.

 

[Kelly.]

what would you be doing with the money you plan to pull out?
is what you are using your money for, worth a ~%40 premium? (ie taxed ~ 40%)


because you mention leaving the country, ill just leave this link here: http://www.zerohedge.com/sites/default/files/American_Expatriation_Guide.pdf

good luck

 

[Original_Intent]

it's a 10% penalty. and if he's planning on leaving the country, the tax ramifications aren't really relevant.

Are you sure the tax ramifications aren;t relevant? They will withhold it before disbursement of the balance, and even if you leave the country - do you think there is any way in hell you are getting a refund on it no matter what? This is not a tax liability that you have to pay later, I am saying you will NEVER see the withheld amount. If you know something different, please let me know!

 

[psi2941]

As much i love paranoid speculation if they are going to take 401k they can also sieze bank accounts, your safe lockers etc why not just put all the money under the mattress ...

they will not, out right take your money,

they will do something like a 50% tax increase of 401k

 

[Zippyjuan]

If you are under 59 and a half years old, closing out your IRA could end up costing you one third to perhaps one half of the money you have in there. Is it worth that to you? (the ten percent penalty plus state and federal taxes). That is a pretty high penalty to me. If you urgently need money, it could be helpful but if you don't urgently need the money, it could be costly.

 

[JoshLowry]

If you are under 59 and a half years old, closing out your IRA could end up costing you one third to perhaps one half of the money you have in there. Is it worth that to you? (the ten percent penalty plus state and federal taxes). That is a pretty high penalty to me. If you urgently need money, it could be helpful but if you don't urgently need the money, it could be costly.

Elwar is saying the government may take all of it before he reaches 60.

That's a worse penalty.

 

[Zippyjuan]

There have indeed been fearmonger rumours that this would happen for many years now- I don't think it will happen but yes, if you do think it will, that would be part of your calculations. In fact, the government has been looking at ways to get people to put more money into 401ks.

 

[pmbug]

Oct 2008:

Hemmed in by the global financial squeeze and commodities slump, Argentina's leftist government has seemingly found a novel way to find the money to stay afloat: cracking open the piggybank of the nation's private pension system.

The government proposed to nationalize the private pensions, which would provide it with much of the cash it needs to meet debt payments and avoid a second default this decade.

The move came as wealthy nations unveiled fresh steps to fight the credit crunch. The U.S. Federal Reserve said it would bolster money-market funds, which have faced withdrawals, by lending as much as $540 billion to the industry. France said it would inject $14 billion into six banks on condition they agree to increase their lending. In a sign banks were a little more willing to lend to each other, the London interbank offered rate, a benchmark for many business and consumer loans, again declined.

Argentine President Cristina Kirchner said the move to take over the private pension system was aimed at protecting investors from losses resulting from global market turmoil. Funds in the system, which is parallel to a government pension system, are administered by financial firms. The private system has about $30 billion in assets and generates about $5 billion in new contributions each year.

While no one knows for sure what the government would do with the private system, economists said nationalization would let the government raid new pension contributions to cover short-term debts due in coming years.
...

http://online.wsj.com/article/SB122460155879054331.html

Jan 2010:

...
The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are leading the effort.
...

http://www.bloomberg.com/apps/news?pid=20603037&sid=aR9zVMXzOeX0

May 2010:

...
The radical solution most favored by Big Labor is the seizure of private 401(k) plans for government disbursement -- which lets them off the hook for their collapsing retirement scheme. And, of course, the Obama administration is eager to accommodate their buddies.

Vice President Joe Biden floated the idea, called “Guaranteed Retirement Accounts” (GRAs), in the February “Middle Class” report.

In conjunction with the report’s release, the Obama administration jointly issued through the Departments of Labor and Treasury a “Request for Information” regarding the “annuitization” of 401(k) plans through “Lifetime Income Options” in the form of a notice to the public of proposed issuance of rules and regulations. (pdf)

House Republican Leader John Boehner (Ohio) and a group of House Republicans are mounting an effort to fight back.
...

http://www.humanevents.com/article.php?id=36823

Oct 2010:

Democrats in the Senate on Thursday held a recess hearing covering a taxpayer bailout of union pensions and a plan to seize private 401(k) plans to more "fairly" distribute taxpayer-funded pensions to everyone.

Sen. Tom Harkin (D-Iowa), Chairman of the Health, Education, Labor and Pensions (HELP) Committee heard from hand-picked witnesses advocating the infamous "Guaranteed Retirement Account" (GRA) authored by Theresa Guilarducci.

(You can find the blistering interview with Guilarducci by radio talk show host Mark Levin in 2007 at the link).

In a nutshell, under the GRA system government would seize private 401(k) accounts, setting up an additional 5% mandatory payroll tax to dole out a "fair" pension to everyone using that confiscated money coupled with the mandated contributions. This would, of course, be a sister government ponzi scheme working in tandem with Social Security, the primary purpose being to give big government politicians additional taxpayer funds to raid to pay for their out-of-control spending.
...

http://www.humanevents.com/article.php?id=39336

Fucking drumbeats, how do they work?

 

[muzzled dogg]

To whom do you have to prove your hardship?

 

[japes]

To whom do you have to prove your hardship?

Ya good question. It sounds a bit subjective. My hardship is I really want to buy gold and silver and it's killing me to see all that money stuck in a 401k that will eventually be confiscated. Maybe that'll work with them?

I recently tried to cash out my 401k and as long as I'm working for my present employer I can't do much with the money. They did tell me about the "hardship" thing and they also told me I could take a loan out against the money. However I would have to pay interest (to myself).

 

[Kelly.]

can you move you 401k into some sort of commodity fund?

that way you sort of hedge against the dollar devaluing, but dont have to pay the 40% tax to withdraw the money until it is absolutely necessary

 

[japes]

can you move you 401k into some sort of commodity fund?

that way you sort of hedge against the dollar devaluing, but dont have to pay the 40% tax to withdraw the money until it is absolutely necessary

That's a good question. I don't remember seeing that as a choice when I set it up but I'll have to look into it.

 

[cubical]

Maybe I missed this part of the thread, but if you are holding assets like stocks or gold then how would they take it? The government isn't going to liquidate everyone 401k. it would destroy the markets. If you have cash sitting in there, maybe they would do something.

 

[Liberty Rebellion]

If you take a lump-sum distribution that is not a direct rollover there is a mandatory 20% tax with holding by the feddies

http://www.irs.gov/taxtopics/tc412.html