Record number of 401K early withdrawal.

[marylander1940]

 

Is using your 401K as an ATM is never a good idea and is even worse than maxing out your CC?

A Record Number of People Dipped Into Their 401(k)s Last Year—Here’s Why Experts Say to Think Twice

[BuffaloKyle]

I'd say open up a new credit card if possible with a promotional 0% interest rate or if you need cash then go to a bank for a loan. I think the people who go the 401k withdrawal route do it as you don't have to pay the money back. But the 10% penalty on top of the regular taxes that come out is quite a hefty price.

[+ Vegas_Millennial]

My company keeps trying to get me to sign up for their 401K, but I don't think I can run that far.  A 5K is my limit.

[BuffaloKyle]

4 hours ago, Vegas_Millennial said:

My company keeps trying to get me to sign up for their 401K, but I don't think I can run that far.  A 5K is my limit.

It's worth it if they do some sort of match as you are missing out on free money basically. One company I was at I put in 5% and they did a match of 10%! There is also a new tax law coming where you'll get a cash deposit at tax time from the government for having a 401k:

How to Qualify for the Retirement Saver’s Match | Retirement | U.S. News

EDIT:

Well I just read the article I posted, 😅, and they have a very low bar for the cut off from getting that government match so that stinks:

 Your earnings must be below certain income cutoffs. The match will be reduced or eliminated based on a person’s modified adjusted gross income. For single filers, the phaseout period begins at $20,500, and individuals who earn more than $35,500 will not be eligible for the saver's match. For head-of-household filers, the phaseout range is $30,750 to $53,250. The phaseout range for married couples begins after $41,000, and couples who earn more than $71,000 will not be eligible.

 

Edited Friday at 02:39 AM by BuffaloKyle

[+ Vegas_Millennial]

11 hours ago, BuffaloKyle said:

There is also a new tax law coming where you'll get a cash deposit at tax time from the government for having a 401k:

How to Qualify for the Retirement Saver’s Match | Retirement | U.S. News

EDIT:

Well I just read the article I posted, 😅, and they have a very low bar for the cut off from getting that government match so that stinks:

 Your earnings must be below certain income cutoffs. The match will be reduced or eliminated based on a person’s modified adjusted gross income. For single filers, the phaseout period begins at $20,500, and individuals who earn more than $35,500 will not be eligible for the saver's match. For head-of-household filers, the phaseout range is $30,750 to $53,250. The phaseout range for married couples begins after $41,000, and couples who earn more than $71,000 will not be eligible.

 

It's not so much new thing, but rather a tweaking of existing tax law.  The Saver's Match replaces the former Saver's Credit.  Both encourage the low-income worker to save for his retirement.  The Saver's Credit gave an instant credit on one's taxes for any contribution a low income worker made to his company's retirement plan or IRA.  Fur example:  Save $500 in a Roth IRA and the government would add $500 to his tax refund that year... So saving for retirement wouldn't cost the worker anything.  The Saver's Match, on the other hand, puts that extra credit into the retirement plan or IRA instead of giving it to the worker immediately.  So now the worker will have more saved for retirement than in the old scenario, provided he can afford to contribute to his retirement in the first place, which many workers can't do.

I know this only because I encouraged an ex-boyfriend to open a Roth IRA and contribute to take advantage of the Saver's Credit, as his income was below the cutoff criteria at the time.

[BuffaloKyle]

8 hours ago, Vegas_Millennial said:

It's not so much new thing, but rather a tweaking of existing tax law.  The Saver's Match replaces the former Saver's Credit.  Both encourage the low-income worker to save for his retirement.  The Saver's Credit gave an instant credit on one's taxes for any contribution a low income worker made to his company's retirement plan or IRA.  Fur example:  Save $500 in a Roth IRA and the government would add $500 to his tax refund that year... So saving for retirement wouldn't cost the worker anything.  The Saver's Match, on the other hand, puts that extra credit into the retirement plan or IRA instead of giving it to the worker immediately.  So now the worker will have more saved for retirement than in the old scenario, provided he can afford to contribute to his retirement in the first place, which many workers can't do.

I know this only because I encouraged an ex-boyfriend to open a Roth IRA and contribute to take advantage of the Saver's Credit, as his income was below the cutoff criteria at the time.

The Saver's Credit is a nonrefundable credit so if you didn't owe taxes you didn't get anything. The Saver's Match is basically a refundable one as you'll get it even if you don't owe taxes.