Cashing Out 401k?

benk

benk

Club Member
Anyone have any experience with doing it? I know you take quite the hit in doing so, but was curious if there is any other reason besides that to not do it. I am engagement ring shopping( no, you can't talk me out of it,lol), and having some extra cash to put towards one would be nice.
 
You would be better off financing it than taking it out of your retirement fund. The penalties/taxes/etc you would run into would be greater than the interest you might build on a loan or credit card, plus you're hurting yourself later on.
 
A lot of places will do 0% for 12 months on rings. If you have the credit to do that, that's the route to go. If you can't, the tax hit will probably not help out your cause. What about taking a loan on the 401k?
 
I guess I just don't like the idea of financing a piece of jewelry. As for it hurting me later on, I have other retirement savings besides my 401k through my employer, and I did not plan on emptying the account either.
 
You take a HUGE hit at tax time. IT is considered earned income if you cash out. Then penalties on top of it...lets say you have 5k in 401k, after penalities, taxes, etc. you only get 2700.00
THEN at end of year you will show your earned income of 5k on taxes....IMO dont do it!
 
If you cash it out, you recognize the withdrawal as income and pay income tax on the income plus a 10% penalty for premature distribution on top of it. Like it was previously said, you are better off financing the ring.
 
stalked_R/T said:
A lot of places will do 0% for 12 months on rings. If you have the credit to do that, that's the route to go. If you can't, the tax hit will probably not help out your cause. What about taking a loan on the 401k?
Click to expand...

If I can get 0% for 12 months, I'll definitely go that route, hell even if the rate is low, I'd probably finance it. Can you explain on borrowing against the 401k, I didn't even know you could do that.
 
You'd have to check with your 401k manager, or your HR person. I know most will allow you to borrow against your 401k and effectively pay yourself interest back, but there may be limitations on it. Get with your HR person to see about it. They should know right away.
 
Some places will let you take a loan out from yourself through your 401k. I'm able to do it through my work. You pick your interest rate and the time frame. You can take up to half and up to I think $50,000 or something like that. The interest you pay just goes back to yourself.

Edit: stalked_r/t beat me to it, but you get the idea now. If it's an option I'd go that route.
 
and I did this all about 2 years ago. I highly recommend avoiding going to any named jewelry stores. I went through a small shop and got an amazing ring for really cheap. My wifes engagement ring was total 1.8 ct diamonds. Center cut was 1 ct, and .8 through the band side jewels. I believe I paid about 2900 and used the stores 0% financing on it. Had it paid off in about 6 months. It was custom made, so it wasn't something that she's ever going to see on another woman, and I had it engraved on the inside. If your woman is anything like mine (pretty girly), she'll absolutely love it. My engraving said "You'll never walk alone". She still comments on it and reads it quite a bit.

My wifes ring appraised for 7k after we got it and was doing all the insurance stuff. It was a very high quality diamond (not the best, but you can't see any blemishes).
 
I would never finance a ring, or a wedding. Colossal waste of money. I wouldn't pull money out of a retirement account for it either.

Second, ask your future wife if she would like to have a shinier ring, or retirement money.

If you are 30 right now, and have say, $5,000 in your 401k right now, and make 50,000 a year (and keep contributing), that has the potential to be one million dollars or more when you reach age 65.
 
robvas said:
I would never finance a ring, or a wedding. Colossal waste of money. I wouldn't pull money out of a retirement account for it either.

Second, ask your future wife if she would like to have a shinier ring, or retirement money.

If you are 30 right now, and have say, $5,000 in your 401k right now, and make 50,000 a year (and keep contributing), that has the potential to be one million dollars or more when you reach age 65.
Click to expand...
If you're taking a loan from yourself through your 401k you aren't losing any money. What little interest you do pay goes back in to your 401k anyhow. I'd agree with financing as little as possible but for a (relatively) small purchase like a ring I'd be comfortable taking a loan from myself.
 
RyeLou said:
If you're taking a loan from yourself through your 401k you aren't losing any money. What little interest you do pay goes back in to your 401k anyhow. I'd agree with financing as little as possible but for a (relatively) small purchase like a ring I'd be comfortable taking a loan from myself.
Click to expand...

He said cash out, not take a loan from.
 
RyeLou said:
If you're taking a loan from yourself through your 401k you aren't losing any money.
Click to expand...

You're using taxed money to pay back pretax money. It's not ideal, but it should be considered before doing so. You also have to make sure you're fully vested in your 401(k) as well, or at least vested enough that you can get at it. I'd pretty much do anything possible that doesn't involve touching one of your retirement accounts.
 
on a side note, if you want to go see the guy who did my wifes ring, let me know.
 
stalked_R/T said:
and I did this all about 2 years ago. I highly recommend avoiding going to any named jewelry stores. I went through a small shop and got an amazing ring for really cheap. My wifes engagement ring was total 1.8 ct diamonds. Center cut was 1 ct, and .8 through the band side jewels. I believe I paid about 2900 and used the stores 0% financing on it. Had it paid off in about 6 months. It was custom made, so it wasn't something that she's ever going to see on another woman, and I had it engraved on the inside. If your woman is anything like mine (pretty girly), she'll absolutely love it. My engraving said "You'll never walk alone". She still comments on it and reads it quite a bit.

My wifes ring appraised for 7k after we got it and was doing all the insurance stuff. It was a very high quality diamond (not the best, but you can't see any blemishes).
Click to expand...



http://www.youtube.com/watch?v=mN8oN8I3lrk
 
Also, IMO, don't buy something that is out of your reach. The size of the ring shouldn't influence the final decision anyway. Not saying go to Wal-Mart and pick up a $5 plastic POS...I mean, put some thought into it. But some people go out and buy a $10,000 ring when they could have spent 1/10th of that amount and still ended up at the altar with a happy woman.

Just my $0.02.
 
There is nothing quite like using an old family
heritage “hand me down” wedding ring, its
traditional, its classic, Its romantic and its…..
…..for cheap guys like me!


I, like a lot of you guys don’t place a very high
value on jewelry and really kinda see it as a
perfect waste of money! But I do understand
that some of you do place the wedding ring
high on your list & are willing to buy a very
$nice$ one.

As others have said, just don’t spend out of
a reasonable range for yourselves, later in
life you can always purchase her that “dream
ring you couldn’t afford when we got married”.
 
You must log in or register to reply here.
Back
Top