Anybody know anything about cashing out a 401k?

My husband has been in construction for the past 15 years. He builds houses. Well, he did. But he was laid off on Friday for lack of work.

Because construction is what he does, it's all he's ever done, he is looking for a different job in his field. We all know what the housing market is like right now, so he may not be building houses. Maybe he can find some handyman work, because he's kind of a jack-of-all-trades.

Just like everyone else, we need money. My pay will cover the mortgage and the car payments, but with only about $120 left over. Then there's still electricity, gas, water, Verizon (can't do without my CrackBerry;)), insurance, and the list goes on and on.

We are probably going to cash out his 401k, once PayChex will let him. My question is, any idea how long it takes before you can cash out, and how long till the money is in hand?

He is online right now, filing for unemployment. But in Tennessee, the maximum benefit (if you qualify for that amount) is $275 per week. Minus 10% for taxes leaves $247.50 per week. Not a lot of money.

Does anybody have any experience with this?

Thanks!

Yes I cashed mine out and beleieve me the govt rips you a new one. After it was all said and done after taxes and penalties they got over half of it :(

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Yeah, I did the math. He has about $22,000 in his 401k. Once he pays the penalty for early withdrawal, then pays taxes, social security, etc, he'll end up with probably about $11,000. I hate to lose that kind of money. But I'd rather lose that and be able to keep my house.

That's what I had to do so I understand. Just save some back for when you file at the end of the year, that's when I got hit with the state tax and the federal penalty tax. I lost my job in august and I am still unemployed, I truly understand. The unemployment check pays next to nothing.

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Sometimes it is good to hear advice from someone "outside" of your situation. Let's think this through for a second. You are willing to give the government 50% of your money for $11,000 in your hand right now.

I see that Tennessee does not have a minimum wage so I'll go with $5/hr. Lets say he works at Walmart for $5/hr for 40 hours a week - thats $200/wk. Subtract 20% for taxes and that leaves you with $160/wk. $160 x 4 = $640 extra each month; add your $120 to that and you now have about $760 more a month.

The point of my post is that cashing out your 401k is NOT a good idea and definetely NOT what you want to do. I'm positive your husband can find a job making more than $5/hr.

Please don't give the government money they haven't earned...

Jq is right about doing whatever you can to avoid withdrawing from your 401K. However, if you do, you don't have to take it all. Talk with an accountant who specializes in tax issues, there is an exemption to the early withdrawal penalty in case of illness or emergency - and unemployment qualifies as an emergency.

Also, FYI, like all states, Tennessee is covered by the Federal Minimum wage law and it is now $6.65 an hour for non-exempt workers. States cannot lower the federal minimum wage for any reason. So the weekly rate Jq calculated above will be higher.

But the reason not to withdraw your retirement is that you will never recover that money once you pull it out. The compounding interest that make these accounts so valuable will be lost forever. You face hardships now, but remember how hard it will be to retire without this money. Retirement will be on you before you realize it.

Good luck, these are such difficult decisions to make.

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