401k withdrawals

toonertoo

Most Awesome Dog
Staff member
Yea brownmonster, your so right, but I havent been a driver for 23 yrs, and I didnt recoup as fast as I should of. had lots going on I wont even go into. I guess Im not perfect, wish I was, since I wasn't Im glad I had something to fall back on.
 

FAVREFAN

Well-Known Member
You CAN'T make a withdrawal until you are at least 59 1/2, unless it's after-tax contributions. Most people only make pre-tax contributions.

If you sever your employment, the possibility exists for you to take the money, but it would cost you half in taxes and penalties. Most people roll the dough over into a self-directed IRA until they're 59 1/2.

You CAN take a hardship loan under a very short list of acceptable reasons and pay youself back at an interest rate of around 8%.


Hardship Withdrawals
While you are an active employee of UPS, you may make withdrawals from your Plan account for specific financial hardships prior to age 59 1/2:
  • purchase of a primary residence;
  • post-secondary education expenses for you or a dependent;
  • to prevent eviction from or foreclosure on your primary residence;
  • payment of unreimbursed medical expenses for you or a dependent;
  • payment for burial or funeral expenses for your deceased parent, spouse, children or other dependents; or
  • expenses for the repair of the damage to your principal residence that would qualify for the casualty deduction for federal income tax purposes.
But again, as I stated before, you really don't want to do this. A loan from your 401 should be viewed as a last resort, after all other options are exhausted.......and even then, I still wouldn't do it. A really bad idea. Read the article in the link on my previos post, insight will be gained.

All the info you need is on the UPS Teamsters website......just type in the word "hardship" in the search window and you will find all your answers related links

Good luck

According to your first statement there are no withdrawals whatsoever on pretax monies under the age of 59 1/2. That is false.
On the second, you can leave it in, roll it into an IRA or roll it into the 401(k) at your next job......thus the term "portable".
On the third, don't confuse "withdrawal" with "loan". Huge difference. No "hardship" on loans, just withdrawals. You can take just under 50% of core assets for "loans". No penalty and you pay back at the current 7%.(1% above prime)...not 8%.
Quick note as well. Not sure if you're a teamster or management. But the copy/paste info you posted does not match mine(teamsters) at all. Many more "hardship" circumstances are posted in mine.
Lastly......Real life example....
.....My friend's wife withdrew $180,000(total account) from her JP Morgan 401(k) to pay off his work truck, their mini-van, their car and all credit cards. They are not in any financial trouble whatsoever, just wanted 0 debts. House is in the clear. She's 44 and he's 38. She payed the 10% penalty and payed 20% tax withholding up front. At tax time they owed a little more and the 3% state tax. Government can't stop you, just penalize you. If it was considered the "hardship withdrawal" she may have avoided the 10% penalty.
Real life example....
.....My sister in law borrowed(loan/not withdrawal) $7,000 for breast implants from her companies 401(k). She payed 0%tax, 0% penalty tax but had to pay it back at that years rate of 7% within the timeframe chosen. This is where you can lose. The S & P 500 payed around 15% that year. She payed herself back at 7%. Loss of 8%. But yes, they look fabulous!
 

toeknee2gx

Well-Known Member
I don't understand how people making full time driver pay for 20 years+ can't come up with a few grand other ways than tapping retirement money.

helllooo..... did you 4get that we live in the land of credit and consumer spending fueling the economy. Americans spend more than they can afford to. Not saying that in this particular case that happened, but Im not surprised when I do see it. [sarcasm]Not living in debt is just unamerican.. [/sarcasm] :happy-very:
 

brownmonster

Man of Great Wisdom
Let's see, breast implants, mini-vans, cars, credit cards or a comfortable early retirement. Come on people, say no to yourself once in a while.
 

barnyard

KTM rider
I can see where a person would need $10,000+ in available savings to prevent a catastrophe if a UPS driver or family member were to get seriously sick.

In my families' case, I had pneumonia and was off work for the month of November (the whole month). If I had not had a week of vacation during that month, we would have been in trouble. Disability was $350ish a week and while our health insurance premiums were paid, living on 1/4ish pay for 4 weeks is tough, real tough.

I can see more days off, possibly even FMLA this spring. My daughter crashed last fall (we race enduros and hare scrambles) and she is having complications from the injuries from that crash. It makes that 401k look mighty tempting.

We need to keep our eye on the prize though. I plan on retiring at 25 yrs and we will need that 401k to supplement the pension, if I plan on really retiring (once I retire, I do not want to have to find another job.)

What has helped us, is that we do live within a 40/hr a week paycheck. That means that I can use all OT earnings to pay off debt and save for the next rainy day.

So, I may not have been a lot of help, so I will add this: look for a Catholic Charities or Lutheran Social Services debt counseling service. I am not suggesting them because of their religious affiliation, but because their services will have value and will truly work in your best interest. Let them work out a budget with you and then spend the 5+ years digging yourself out of debt. My family did it almost 10 years ago. We did not have to file bankruptcy and we did pay off all our creditors

Good luck to you and your family

TB
 

toonertoo

Most Awesome Dog
Staff member
Yes that rainy day fund dont last too long, when the ole paycheck isnt rolling in.
I did have other choices, which probably in hindsight would have been better. But you do what you do and live with the consequences.
Even living in a shoebox doesnt work tho........My home is 726 sq foot and my vehicles have 240k, and 140k, and are 10 and 8 yrs old. So I dont live extravagantly. At least I know how to take care of them:surprised:
 

rod

Retired 22 years
Yes that rainy day fund dont last too long, when the ole paycheck isnt rolling in.
I did have other choices, which probably in hindsight would have been better. But you do what you do and live with the consequences.
Even living in a shoebox doesnt work tho........My home is 726 sq foot and my vehicles have 240k, and 140k, and are 10 and 8 yrs old. So I dont live extravagantly. At least I know how to take care of them:surprised:
A friend of mine has been a driver for 29 years and he lives in a converted chicken coop. He honestly don't have a pot to piss in. Medical problems had nothing to do with his perdicament. He owes his situation to gambling, drinking and believing that every good looking bar maid that says hi to him is in love with him. I quit trying to reason with him a long time ago.:happy2: If he didn't have the easiest route in the center (actual physical work) he would of been dead years ago.
 

toonertoo

Most Awesome Dog
Staff member
I think everyone knows one. I know a guy who was making around 70 k for 20 yrs straight. Lots of double and triple shifts, worked hard for it.
Now hes living in a camper, in his ex wifes side yard. A ratty a** old s10, and waiting for his disability checks to roll in. Sad he never saved a dime.
 

FAVREFAN

Well-Known Member
Let's see, breast implants, mini-vans, cars, credit cards or a comfortable early retirement. Come on people, say no to yourself once in a while.
Yeah, I think that my friend's wife was foolish to liquidate her 401(k) but my friend is 38 with everything payed off and no debts. His house is huge and only 5 years old. I'd never touch my 401 unless it was because of being layed off or medical issues. Peace!
 

happyboy

Well-Known Member
I like to contribute a little money to the after tax 401k, you can get that money wheneveer you want it or need it, takes about a week to get it. I use that as my rainy day fund, plus i also buy a nice amount of ups stock every week.

Google the "debt snowball" thats some good advice to help get rid of consumer debt.

Drive slow,
 

stevetheupsguy

sʇǝʌǝʇɥǝndsƃnʎ
Anybody else experience the hoops you have to jump through in order to borrow money from you 401K? I've sent in form 4 times and been rejected because they needed more info, not the right paper, etc...
 

spif91

Well-Known Member
You won't pay penalties if you are approved for the hardship withdrawal. You will have to pay it back at 1% above prime to your own account. If you are not approved you can withdraw the entire account if you want but you'll be paying a 10% penalty and regular taxes on the full amount. Let me be blunt, you're a fool if you withdraw without hardship approval and even with approval your making a mistake. I hate to be so honest with you but people shouldn't even invest in a 401(k) if you end up living unresponsibly and need to use it like a piggy bank. It's a long term investment vehicle. You just wasted 20 years of investing. You'll never, never be able to make up for it if you go through with this. If it is that bad, look into filing bk and try to keep your retirement in tact.
It's one thing if you get hurt or lose your job but this kind of thing is........well, let me stop.
In closing, take other posters advise......find an alternative.

Just my 2cents worth....borrowed 5000 for my sons 2 year of college last year. Set it up on 52 payments. They took 81.57 out of my check each week. At 9.25 I made 765 dollars paying myself back in interest. Don't know if I would have made that last year on that 5000 without putting a pencil to it. My balanced fund or s&p didn't make 9.25% much of last year....
 
Last edited:

UpstateNYUPSer(Ret)

Well-Known Member
Just my 2cents worth....borrowed 5000 for my sons 2 year of college last year. Set it up on 52 payments. They took 81.57 out of my check each week. At 9.25 I made 765 dollars paying myself back in interest. Don't know if I would have made that last year on that 5000 without putting a pencil to it. My balanced fund or s&p didn't make 9.25% much of last year....

You used the 401k loan option perfectly. You borrowed just what you needed and kept the repayment term short. You are right in that you probably made more money in repaid interest than you would have made in performance. However, the one point that you left out was the compounding that you would have received had you not taken out the loan but $5K borrowed for a year is not going to make that much difference.

The problem with 401k loans is when you borrow more than you need or extend the repayment time. This is not as much of a concern in a down economy but becomes more so when the economy is booming.
 

Highwayman

Well-Known Member
While you are doing your research you should pick up Dave Ramsey's book "Total Money Makeover". It helped me get out of debt 3 years ago.:smart:
 

UpstateNYUPSer(Ret)

Well-Known Member
While you are doing your research you should pick up Dave Ramsey's book "Total Money Makeover". It helped me get out of debt 3 years ago.:smart:

I purchased his book about a month ago after reading about it here. His approach is straightforward. His philosophy is faith based but you do not need to be religious to use his program. I hope to be debt free, other than my mortgage, by Christmas 2010.
 

stevetheupsguy

sʇǝʌǝʇɥǝndsƃnʎ
Hey STUG, Did the 401k plan charge you $50 processing fee for each denied application?
I wasn't informed of any charges, nor did I read anything that I signed stating this. If they do try this, they will have one, severely pissed off STUG.:madashell:

I purchased his book about a month ago after reading about it here. His approach is straightforward. His philosophy is faith based but you do not need to be religious to use his program. I hope to be debt free, other than my mortgage, by Christmas 2010.
Will I be hearing a shout of Hallelujah from upstate NY around that time?
 
Top