401k money question...to take it out or not to take it out

[Rockchick26]

Here is my situation: I have been unemployed for 8 months with no job leads in sight. My unemployment money runs out in 3 months. I am living in an apartment where the rent is slowly sucking up all my money. Moving home is the least desired of my options, in fact it isn't even on my options list. Here is one option which involves my 401k money. I have about $4500 in there right now. I am fully aware that if I were to take this money out now (I'm 37) that I would be charged a penalty as well as having to pay taxes on this money. Here's the BUT...if i kept this money in there until I retire, it isn't going to do much good for me then. In other words, the couple thousand bucks is much more needed now than when I am retired. At least then I'll have social security and I'd have somewhere to live (my parents will leave me and my brother with half their estates; they both have their own houses). Right now, I got nothing.

I realize that I would only get about $3000 of that money after the taxes and fees, but that $3000 would allow me to buy a decent RV or camper that I could live in when I can't afford to stay here anymore (which is one of my goals, to drive around the country in something I can live in). OR if I decide not to do that, I could use the money to keep me living here for a few more months longer in hopes that I can get a job in that time.

I just feel that the money would be much more useful to me now than it would be then. Any thoughts on what I should do?

[SomeRandomGuy]

You could easily grow that $4500 into $100,000 by the time you're 62. Also, my understanding is that cashing out a 401(k) early costs approximately 40% after penalties and taxes, which would leave you only $2700. It seems rather depressing to think of giving up $100,000 for a $2700 short term gain. On the other hand, its easy to see how the money can help you now. Good luck with which ever route you choose.

[spirit4711]

If you take out the money now, be sure to use it to make money with it. Otherwise you'll be in the same situation in a few moinths from now, without 401k money...

Buying a RV doesn't bring in money. What can you do to make money with the 401k money?

[James81]

Sounds foolish to me. You're going to pitch away an appreciating asset to buy a depreciating one. And you're going to do so at massive tax penalties for merely temporary gain.

You're also making a mistake that I think a lot of people end up getting screwed by: relying on social security as their sole retirement or thinking that it'll always be there.

My advice is for you to find another way. When you put money into a retirement account, you need to pretend like you spent it and will never see it again.

[freddy]

Maybe you could sell what ever vehicle you have now and buy a standard type van. Sell off other un-used items you really don't need to raise some money. Use this van as a place to sleep and travel around in for the short term, looking for a job. I would think a move to warmer locations would be necessary for this to work well, due to the compact space, and cold cold whether at night. I would keep the 401 money where it is as other having said. good luck

[Rockchick26]

Originally Posted by SomeRandomGuy

You could easily grow that $4500 into $100,000 by the time you're 62. Also, my understanding is that cashing out a 401(k) early costs approximately 40% after penalties and taxes, which would leave you only $2700. It seems rather depressing to think of giving up $100,000 for a $2700 short term gain. On the other hand, its easy to see how the money can help you now. Good luck with which ever route you choose.

That has to be wrong. It took me 18 years to get it up to $4000...in another 18 years I'll only have $8000, assuming I don't lose money...but how can it grow if I'm not working (or working at a job that has the 401k plan?)

[Rockchick26]

Originally Posted by spirit4711

If you take out the money now, be sure to use it to make money with it. Otherwise you'll be in the same situation in a few moinths from now, without 401k money...

Buying a RV doesn't bring in money. What can you do to make money with the 401k money?

Well the money is no good to me if I stick it in the bank to earn interest off it, I wouldn't even make enough anyway. And i'm not interested in buying a business, I have no experience in that anyway. And if someone were to invest money into something, it seems to me $4000 is a pretty low amount. But even if I did this, I wouldn't be earning money right away anyway and I'd still be in the same situation I am now.

[spirit4711]

You might invest the money in trainings / tools to develop skills to make (more) money on your web sites?

Ultimately it's up to you. But don't sell yourself short. If you buy something for it that doesn't give you a shot at more earning power, better leave it in the 401(k).

[SomeRandomGuy]

Originally Posted by Rockchick26

That has to be wrong. It took me 18 years to get it up to $4000...in another 18 years I'll only have $8000, assuming I don't lose money...but how can it grow if I'm not working (or working at a job that has the 401k plan?)

You are right, I'm surprised no one else has called me on that before now. I just threw the information into an online calculator, and either it gave me the wrong results or I entered something wrong. If you invest $4500 for 25 years @ a 6.5% rate return, it would grow to $22,752.89.

Sorry for the misleading numbers from before. Obviously $23,000 isn't nearly the same as giving up a potential $100,000.

[Rockchick26]

Originally Posted by James81

Sounds foolish to me. You're going to pitch away an appreciating asset to buy a depreciating one. And you're going to do so at massive tax penalties for merely temporary gain.

But everything depreciates. I had to sell my house for less than what I paid for it. I don't see how having an RV would be a temporary gain though, it's somewhere to live and it would cost less for upkeeping that than it would to upkeep a house.

You're also making a mistake that I think a lot of people end up getting screwed by: relying on social security as their sole retirement or thinking that it'll always be there.

Well, if I don't have it then nobody else will either and then at least the whole country will be in the same boat I am, so I'm not too worried about that. But all I'd really need is enough money for food and a few bills, there are lots of easy jobs retired people can do.

[Rockchick26]

Originally Posted by freddy

Maybe you could sell what ever vehicle you have now and buy a standard type van. Sell off other un-used items you really don't need to raise some money. Use this van as a place to sleep and travel around in for the short term, looking for a job. I would think a move to warmer locations would be necessary for this to work well, due to the compact space, and cold cold whether at night. I would keep the 401 money where it is as other having said. good luck

Well my car isn't worth more than $200 i'm sure, it's a '93 with 106,000 miles on it and it has lots of problems. My truck I can't sell because I need something reliable, and also I might need it to tow my trailer if I get one of those pull-behind ones.

[freddy]

" But all I'd really need is enough money for food and a few bills, there are lots of easy jobs retired people can do."

So why are you not working on doing this now? A little money comming in is better than no money. And you never know when that hansome rich guy may walk right into your life, while your shoveling snow for someone not able. Traveling can work too, just be warned that jobs are hard to fine anywhere you go. Peace

[ellie]

Rockchic I hope I don't come off as rude, by doesn't in concern you that your frittering about? I understand the frittering, because I have done that too. The thing is a try and come up with resolutions or try to understand why situations like these are arising again and again.

So for example if I can't find a job, or every job I apply for is a failure, I ask myself why? Why do I fail at job interviews or again and again. Is because I am not well versed in the subject I am being interviewed about, do I not like working for other people, I just nervous in interviews, I want a job that suits me perfectly? etc.

All of these are points are valid and none are really right or wrong, but if you understand why, you might be able to come up with a better solution for what you want in the long term. I flittered about from job to job and never asked myself why that was happening, but eventually when I looked at myself I asked the question, why? When I broke it down, it helped me a lot. I basically came out the whole experience, learning in fact that I just don't suit working for other people. As soon as I realised this and stopped trying to make myself fit into a normal 9-5 job, things started to work out much better.

I am worried you taking out the money, is just a very short interim solution but is actually not getting to the crux about what this all about. By the sounds of it you probably will have to take the money and use it, but in the meantime I would be really trying to breakdown what it is, that makes it hard for you to gain a steady income.

[Rockchick26]

Originally Posted by freddy

" But all I'd really need is enough money for food and a few bills, there are lots of easy jobs retired people can do."

So why are you not working on doing this now? A little money comming in is better than no money. And you never know when that hansome rich guy may walk right into your life, while your shoveling snow for someone not able. Traveling can work too, just be warned that jobs are hard to fine anywhere you go. Peace

Because right now I live in a $650-a month apartment and I couldn't live here working a piddly job like that. I'm also getting $325 a week for unemployment and we don't have to accept a job that pays less than our old one (which, in my case, nothing is).

[Rockchick26]

Originally Posted by ellie

Rockchic I hope I don't come off as rude, by doesn't in concern you that your frittering about? I understand the frittering, because I have done that too. The thing is a try and come up with resolutions or try to understand why situations like these are arising again and again.

So for example if I can't find a job, or every job I apply for is a failure, I ask myself why? Why do I fail at job interviews or again and again. Is because I am not well versed in the subject I am being interviewed about, do I not like working for other people, I just nervous in interviews, I want a job that suits me perfectly? etc.

All of these are points are valid and none are really right or wrong, but if you understand why, you might be able to come up with a better solution for what you want in the long term. I flittered about from job to job and never asked myself why that was happening, but eventually when I looked at myself I asked the question, why? When I broke it down, it helped me a lot. I basically came out the whole experience, learning in fact that I just don't suit working for other people. As soon as I realised this and stopped trying to make myself fit into a normal 9-5 job, things started to work out much better.

I am worried you taking out the money, is just a very short interim solution but is actually not getting to the crux about what this all about. By the sounds of it you probably will have to take the money and use it, but in the meantime I would be really trying to breakdown what it is, that makes it hard for you to gain a steady income.

I don't really know what you mean by "frittering about"...I'm not bouncing around from job to job, I haven't even had a job interview since 18 years ago when I applied for the job that laid me off.

[spirit4711]

Originally Posted by Rockchick26

I don't really know what you mean by "frittering about"...I'm not bouncing around from job to job, I haven't even had a job interview since 18 years ago when I applied for the job that laid me off.

When I re-read the topic, I see the same as e.g. Freddy and James: you're convincing yourself you need to use the 401(k) money, but you will use it for short term 'solutions' that do not bring in money.

That is of course your prerogative.

What I would like to see for you is that if you use the 401(k) money you will you it to generate more money. I don't see in your replies so far that you are actually planning to do that. So I don't know how I can help you with this. I certainly will not say 'sure, take the money and no doubt something will come up. Don't worry.'

[Rockchick26]

Originally Posted by spirit4711

When I re-read the topic, I see the same as e.g. Freddy and James: you're convincing yourself you need to use the 401(k) money, but you will use it for short term 'solutions' that do not bring in money.

That is of course your prerogative.

What I would like to see for you is that if you use the 401(k) money you will you it to generate more money. I don't see in your replies so far that you are actually planning to do that. So I don't know how I can help you with this. I certainly will not say 'sure, take the money and no doubt something will come up. Don't worry.'

Well I was thinking more along the lines of giving me some place to live, so I'm not homeless. If I took it out to make more money on it, I would still be homeless, because the money I'd be making wouldn't happen immediately. I don't know what else to do. I mean I can sleep on people's couches but how long can that last for? At least if I had an RV I could live in it for 1/5th of the price I am living here (assuming I can find a part time job which is much easier to get than a full time one right now. I'm just trying to avoid not having a place to live, that's all. I found a lot of really nice RV's for less than $2500.

[ellie]

Yes sorry meant flittering about....to jump from job to job, or jumping from one thing to another.

[freddy]

Here is the point I'm trying to make with my last post to you. Do what ever type side job ( cash money ) you can do. Let’s say you spend 10 or 20 bucks for some rags dish soap and a bucket. You walk or drive around town and offer to wash cars or windows for people. You let them decide the price, for what ever they think the value is worth to them. You keep getting your weekly check, as long as it last. You do your best job with a positive attitude. And if they pay you 2 bucks so be it. What will this do for you is to provide other door of opportunity to be opened.
If I'm sitting in my office and some one comes in dressed and looking presentable and offers to wash my car or any number of jobs I don't like to do. And they say's Just pay me what its worth to you. On some points, I might think oh this is going to be a sloppy job. I'll just give them a couple of bucks. But if I see they do a great job I might pay them 20 bucks. And tell them to come back in two week to wash the car again. And if there that much of a go getter. I might hire them to work in my company because they are showing a attitude that would show value to me.
In the short term it gets you a few bucks in your pocket. In the long term you open possible connections that could land you your next full time job. Provide good service people hardly notice. Provide great service, people fight to get you back.
Please take this as kind motivating advice as I intend it to be. I know it not easy for you now. But the saying goes “when the going get tough the tough get going. Prays and blessing to you. Peace

[Rockchick26]

Originally Posted by freddy

Here is the point I'm trying to make with my last post to you. Do what ever type side job ( cash money ) you can do. Let’s say you spend 10 or 20 bucks for some rags dish soap and a bucket. You walk or drive around town and offer to wash cars or windows for people. You let them decide the price, for what ever they think the value is worth to them. You keep getting your weekly check, as long as it last. You do your best job with a positive attitude. And if they pay you 2 bucks so be it. What will this do for you is to provide other door of opportunity to be opened.
If I'm sitting in my office and some one comes in dressed and looking presentable and offers to wash my car or any number of jobs I don't like to do. And they say's Just pay me what its worth to you. On some points, I might think oh this is going to be a sloppy job. I'll just give them a couple of bucks. But if I see they do a great job I might pay them 20 bucks. And tell them to come back in two week to wash the car again. And if there that much of a go getter. I might hire them to work in my company because they are showing a attitude that would show value to me.
In the short term it gets you a few bucks in your pocket. In the long term you open possible connections that could land you your next full time job. Provide good service people hardly notice. Provide great service, people fight to get you back.
Please take this as kind motivating advice as I intend it to be. I know it not easy for you now. But the saying goes “when the going get tough the tough get going. Prays and blessing to you. Peace

That's a good idea! It would help me stay in shape too! I also checked into traveling jobs (especially for RV'ers) and there are tons of job listings for positions in campgrounds, where they expect you to come and go, a lot of seasonal stuff too.

I checked into newer RV's (used but they're still around the $20,000 range), I'm thinking something like that will be more efficient and trustworthy than an old $2000 one, because I want this to last me for many years. But I can't get a loan for one unless I have a job, so, I guess my plan is stuck until I can get a job.

[ntvinh986]

Originally Posted by SomeRandomGuy

You could easily grow that $4500 into $100,000 by the time you're 62. Also, my understanding is that cashing out a 401(k) early costs approximately 40% after penalties and taxes, which would leave you only $2700. It seems rather depressing to think of giving up $100,000 for a $2700 short term gain. On the other hand, its easy to see how the money can help you now. Good luck with which ever route you choose.

Hi all!
I've just visited this forum. Happy to get acquainted with you. Thanks.