Join the Meeting Place for Moms!
Talk to other moms, share advice, and have fun!

(minimum 6 characters)

If you're Jobless, can you use your 401K to live on?

Say you lost your job. You've ran out of benefits. Its a long time job of a quarter century. There's no jobs in your area. You don 't know what to do. Moving isn't a option. Just one hardship after another.. Desperate measures. Can you use your 401K? The only good thing is you're children are now adults! Please no bashing. Being kicked while you're down isn't a good time.

Answer Question
 
Angellinda

Asked by Angellinda at 9:59 AM on Jan. 19, 2010 in Money & Work

Level 21 (11,804 Credits)
Answers (9)
  • you can cash in your 401K (with penalties) when ever you want and use it for what ever you want.
    Anonymous

    Answer by Anonymous at 10:00 AM on Jan. 19, 2010

  • You can, but you'd have nothing for when you hit retirement age, plus you'd have to pay penalties for cashing in early and taxes because it's counted as income. I know we're struggling with the same "do we or don't we" with ours - thanks to the economy our income is not enough to raise the kids we had income for when we had them, and though we qualify for all kinds of assistance based on income (we only recieve medicaid) we don't qualify for food stamps (the only other help we could really use right now) because of that 401k from hubby's previous job. They'd rather we cash it out and have to pay more in penalties and taxes than we'd recieve - by the time all the fees were taken care of we'd only have a couple grand left over (yeah, it's taken a huge hit over the years) - if we cashed it out THEN they'd give us a couple hundred FS, argh. GL with your decision, it's not an easy one!
    Anonymous

    Answer by Anonymous at 10:27 AM on Jan. 19, 2010

  • Anonymous

    Answer by Anonymous at 11:39 AM on Jan. 19, 2010

  • You can, but you shouldn't
    rkoloms

    Answer by rkoloms at 12:29 PM on Jan. 19, 2010

  • It really depends on your plan. Some do not allow you to cash them out without HIGH penalties until you are of retirement age. Some allow you to borrow from them and then you have to pay them back. I would do your homework on your plan first. It also takes 6-8 weeks to receive it once you cash it out.
    my3turtles

    Answer by my3turtles at 5:30 PM on Jan. 19, 2010

  • Yes you can. You will probably lose almost half of it in taxes and penalties though unless you are 59 I think. If you choose to do this find out exactly how much you need to pay in taxes (at least 20% federal taxes alone most likely plus state) and have it taken out at the time of disbursement. Good luck. It isn't a good thing if you can avoid it but you have to do what you have to do. My husband recently liquidated a 401K from a former employer to pay off high interest credit cards and avoid bankruptcy. I didn't think it was a good decision, but it was his to make. Your financial advisor from the plan (Fidelity, Prudential, whoever) should be able to talk to you about the details when you call the number on the website or on your monthly statement.
    jamesonjustines

    Answer by jamesonjustines at 9:31 PM on Jan. 19, 2010

  • PS My husband rec'd his in less than a week. It was Fed Exed to him at no cost. I am sure this will vary by plan. Ask so you know.
    jamesonjustines

    Answer by jamesonjustines at 9:31 PM on Jan. 19, 2010

  • yes
    Texan1993

    Answer by Texan1993 at 9:33 PM on Jan. 19, 2010

  • Like others have said, you can, but it's not a good idea. The market is still down (compared to what it was at it's peak) so you're getting hit with taxes, penalties and then to top it all off, it will only sell for part of what it is worth.

    Even though you are in a rut you still have to be thinking long term. It would be terrible to get through all this and then not have a retirement account.

    Take a hard look at your expense. Do you need to down size your home or apartment? Get rid of your car, (and the car payments) cable, etc?

    Get on a written budget and stick with it. You'll be surprised how much money you will save just by telling your money where to go instead of watching it run out the door.

    Of course file for unemployment and start looking for something else. Be willing to work for minimum wage if you have to.

    Good luck! You'll do fine, but that doesn't mean you won't have to sacrifice and work hard.
    Anonymous

    Answer by Anonymous at 2:07 AM on Jan. 20, 2010

Join CafeMom now to contribute your answer and become part of our community. It's free and takes just a minute.