Ok, I currently have about $7,500 in my 401k at my current place of work. (I'm only 22) I want to go to a good school, preferably Watkins & Shepard, and I have so little in my 401k, losing money on it in this economy, and 40 years to make it up. I understand that I will only see about $4000 of that $7500 after all taxes and fees are taken out but that would pay for school. Good idea or bad? I have also heard that if I close that account I can't ever get another 401k account, is that true?
Closing one 401k account does not prohibit you from starting another one later. When I was a few years older than you, I left a company and cashed in my 401K to help me cover expenses. I had about what you currently have invested. If you cash it in, expect to pay about 30-40% in taxes and early with withdrawl fees IIRC.
If you are in an employer sponsored 401k program AND they have contributed funds to your account as in a company "match" you may lose some of the money your employer put in if you are not 100% vested. A better plan would be to leave the money in your 401k (the stock market will rally and you will have had the benefit of buying in at a low rate) and look into some local grants or job employment re-training programs to get the training cheaply. Of course you could also look into company sponsored training. Just be aware that you will have to work for that company for 1 to 2 years to get the training for "free." You will need to get experience anyway so count on staying with your first job for at least 1 year anyway. Not true.
I'm expecting half to a little more, but if that gets me through Driving School and into a truck I am happy. I would borrow against it but if I leave my current company I have to pay the full balance of the loan within 60 days or end up paying the taxes and early withdrawal fee anyway...
So basically I get only what I've put into it...well that sucks my personal balance is only $3700...looks like I would only see about half of what I previously thought. I wonder if I could get a personal loan from my bank for "educational purposes"
Some relatively good news on that subject, I just talked to my dad (who also happens to be my boss) and he said that it is my money, doesn't matter what the company has contributed so I could in theory take out the whole amount and get that $4000.
so you are 100% vested from DAY ONE?? i STILL wouldnt touch it though why pay 40% on a "loan" , when you might be able to get one at 10-20 somewhere else. although banks aren't lending a bunch lately it is worth looking into. getting out of the 401K when the market is down AND pay 40% on top??
Cashing out a 401K is NOT the same as taking a loan against it. Circumstances vary. But I take your point.
good, maybe i worded it a little misleading LOL i was comparing "cashing out" as basically like a "loan" where you pay 40% interest to BORROW your OWN money sorry, dave ramsey fan here
