Early Retirement Payout

[BootsOnTarmac]

You can buy anything you want with a 401k loan. You decide the amount you want and how many years to pay it off. A service fee and a loan percentage are what you will pay. Weekly deductions from your paycheck will continue until you pay it off. You can only borrow the amount that is vested. Vanguard will walk you through it. I agree, if at all possible, never borrow from your 401k. Many use this option to pay down high interest credit cards, etc. The money will not be available for future market growth until the loan is paid off.

 

[abused.crr]

I'd have to log in and check again to get the exact number but my traditional is like high 6?? Or low 7?? But I'd do a buy out, if it was offered for the monthly amount x 12 months x 10 years. And my family has a great longevity. Why??? Cause I'd rather have the quarter in my hand than the dollar in Fedex's hand. Let's flip it around. Are you willing to give Fedex that lump sum in cash just for a monthly check? Not me.

 

[bacha29]

You can buy anything you want with a 401k loan. You decide the amount you want and how many years to pay it off. A service fee and a loan percentage are what you will pay. Weekly deductions from your paycheck will continue until you pay it off. You can only borrow the amount that is vested. Vanguard will walk you through it. I agree, if at all possible, never borrow from your 401k. Many use this option to pay down high interest credit cards, etc. The money will not be available for future market growth until the loan is paid off.

The old rule was that if you make a withdrawal from a qualified retirement plan before age 59.5 or disabled you had 60 days to roll it into another qualified plan or you pay the piper the tax plus a penalty of 10% of the withdrawal. Before sure you know what the consequences are if don't play by the rules.

 

[BootsOnTarmac]

I correct myself, the amount of the 401k loan that is not paid off is not available for possible future growth. Also - The paycheck deductions for the loan are AFTER the tax has been taken out of your paycheck.

 

[BootsOnTarmac]

The old rule was that if you make a withdrawal from a qualified retirement plan before age 59.5 or disabled you had 60 days to roll it into another qualified plan or you pay the piper the tax plus a penalty of 10% of the withdrawal. Before sure you know what the consequences are if don't play by the rules.

This does not apply to a 401k loan unless you don't pay it back within the terms of the loan. Remember, payments to the loan are taxed as income. You pay a loan origination fee and a loan rate (percentage, say 3%) as well as an after tax payroll deduction. This all adds up to a "penalty" for borrowing money from your 401K. This is the case for non retired current employees.

 

[MAKAVELI]

I believe you can withdraw penalty free if you use it for a down payment on a home.

 

[Oldfart]

If you leave the company with an outstanding balance on a 401k loan, you have something like 90 days to payoff the loan or the balance will be considered early withdrawal and subject to some serious penalties.

 

[BootsOnTarmac]

Yes, funds are available from many 401k plans, IRA's ( Roth and Traditional) for First Time Home Buyers without penalty. I advise anyone doing this consult a Tax Attorney before doing so.

 

[BootsOnTarmac]

If you leave the company with an outstanding balance on a 401k loan, you have something like 90 days to payoff the loan or the balance will be considered early withdrawal and subject to some serious penalties.

YES!

 

[bacha29]

YES![/QUOTE
Moral of the story. Don't touch the damn thing until all other options have been exhausted.

 

[UpstateNYUPSer(Ret)]

You can buy anything you want with a 401k loan. You decide the amount you want and how many years to pay it off. A service fee and a loan percentage are what you will pay. Weekly deductions from your paycheck will continue until you pay it off. You can only borrow the amount that is vested. Vanguard will walk you through it. I agree, if at all possible, never borrow from your 401k. Many use this option to pay down high interest credit cards, etc. The money will not be available for future market growth until the loan is paid off.

Our 401k has very specific criteria that must be met before a loan request is approved.

 

[Serf]

I believe Vanguard offers 12-60 month loan payoff plans at a rate of 3.25-3.5% interest. My accountant basically told me; "While it can't hurt to contribute to a 401k, especially if your employer is offering some sort of match. You don't exactly make enough money for it to actually matter big picture." I think between my contributions and X's, it was about 2,450 for the year. Think about a 360 account with a guaranteed rate of return and money that is yours and actually accessible without penalty.

 

[BootsOnTarmac]

360 accounts are funded after tax. A 401K is pre tax + employer contribution. The 360 account is just a paperless money market account paying less than 1.5%. I will stick with the 401K and the options available for investing, which currently pay way more than money market accounts, even in a bad year. You have the advantage of getting your money out quickly without penalty in a 360, just like any bank account.

 

[McFeely]

My accountant basically told me; "While it can't hurt to contribute to a 401k, especially if your employer is offering some sort of match. You don't exactly make enough money for it to actually matter big picture."

My 401k had a 14.9% in the last 12 months, but only 5% over the last 3 years. Certainly not consistent returns, but money saved and put away before I spend it is better than nothing. Especially considering the company match added to that.

 

[Oldfart]

My accountant basically told me; "While it can't hurt to contribute to a 401k, especially if your employer is offering some sort of match. You don't exactly make enough money for it to actually matter big picture." .

Sounds like you need to fire your accountant. 55% return just on the match. You lower your taxable income and have a very good opportunity to get 10% or more gain on your investments with some risk involved. Have never heard any money manager or accountant NOT advise to fully fund a 401k. Not familiar with the plan you discussed but anything that guarantees a return can't match a good earning 401k.

 

[Serf]

Well, he basically said: You make small beans at X. And your employer match is crap. Often your employer will match what you put in your 401k. So it’s “free money” (ask yourself why is this the only example of free money in the entire world?) When you are 59.5 years old you are allowed, like a parent allows a child, to take money out. It’s taxed then but now you’ve benefited from the 5-7% per year that is required by law (kidding).
Do you think companies really pay you free money? Companies that don’t have an employer 401 match pay higher salaries. Studies based on tax data showed that for every dollar an employer (on average) contributes to a 401k match, they pay 99 cents less in salary.

 

[Oldfart]

Well, he basically said: You make small beans at X. And your employer match is crap. Often your employer will match what you put in your 401k. So it’s “free money” (ask yourself why is this the only example of free money in the entire world?) When you are 59.5 years old you are allowed, like a parent allows a child, to take money out. It’s taxed then but now you’ve benefited from the 5-7% per year that is required by law (kidding).
Do you think companies really pay you free money? Companies that don’t have an employer 401 match pay higher salaries. Studies based on tax data showed that for every dollar an employer (on average) contributes to a 401k match, they pay 99 cents less in salary.

55% match is about normal. About the only way you will beat that is to work at a non-profit organization. I know 1 that pays 3 to your 1. If you made more money and did not have a 401k to invest into, are you better off? You lower your taxable income, get a 55% match and get some excellent returns with a 401k. If you made 2k more per year and invested none of it for retirement, what are you gonna live on when you do retire?

 

[Meat]

Well, he basically said: You make small beans at X. And your employer match is crap. Often your employer will match what you put in your 401k. So it’s “free money” (ask yourself why is this the only example of free money in the entire world?) When you are 59.5 years old you are allowed, like a parent allows a child, to take money out. It’s taxed then but now you’ve benefited from the 5-7% per year that is required by law (kidding).
Do you think companies really pay you free money? Companies that don’t have an employer 401 match pay higher salaries. Studies based on tax data showed that for every dollar an employer (on average) contributes to a 401k match, they pay 99 cents less in salary.

Let me guess, he offered to introduce you to people that would only charge you a paltry one percent of your annual contributions to manage your retirement contributions.

 

[Meat]

I think between my contributions and X's, it was about 2,450 for the year.

Yowza, you either need to find a new gig, or increase your contributions ASAP!

 

[Oldfart]

Let me guess, he offered to introduce you to people that would only charge you a paltry one percent of your annual contributions to manage your retirement contributions.

I have a managed account with a large brokerage house that does charge a yearly fee based on your balance. I believe they charge about .8% yearly. It has done very well. I actually mirror their moves with another account that I do not pay their fees on and it has done very well too. I get their advise on 1 account and use it on another account.