401 K Withdrawal?

[avokshi]

Hello,
I may be losing my job soon, if I do I will have to cash in my 401k, the cash after taxes will be around $30-50k, depending on when I am fired....due to vesting time frames....I have been sending all my available cash for my mum to rebuild our family home, it burned down without insurance and took my dad with it. And I would be wiring the money overseas for that project. How long after doing this would I have to wait to declare bankruptcy?

[espo1357]

Hello,
I may be losing my job soon, if I do I will have to cash in my 401k, the cash after taxes will be around $30-50k, depending on when I am fired....due to vesting time frames....I have been sending all my available cash for my mum to rebuild our family home, it burned down without insurance and took my dad with it. And I would be wiring the money overseas for that project. How long after doing this would I have to wait to declare bankruptcy?

BS post?

Anyway...

Not a good move to cash it out and then file BK. BK comes before you do that, and then you should wait for the discharge before doing anything with the 401k.

Besides, you would be better off finding another job, and then taking a loan off of the 401k for half, AFTER the discharge.

Thanks for wasting my time if this is a BS post.

Good luck.

[DebtHater]

Is that $30 to $50K after taxes and penalties or just taxes?

I wouldn't pull from a 401K unless it's an absolute last resort. First I would concentrate my efforts into finding a new job.

You're also quick to mention bankruptcy. Bankruptcy won't help you find a new job. But since you asked, since you're funneling money overseas you will have to wait at least six months to file.

[avokshi]

Thanks!

BS post?

Anyway...

Not a good move to cash it out and then file BK. BK comes before you do that, and then you should wait for the discharge before doing anything with the 401k.

Besides, you would be better off finding another job, and then taking a loan off of the 401k for half, AFTER the discharge.

Thanks for wasting my time if this is a BS post.

Good luck.

No BS (but I am sure your meter is very good)!

[avokshi]

Is that $30 to $50K after taxes and penalties or just taxes?

I wouldn't pull from a 401K unless it's an absolute last resort. First I would concentrate my efforts into finding a new job.

You're also quick to mention bankruptcy. Bankruptcy won't help you find a new job. But since you asked, since you're funneling money overseas you will have to wait at least six months to file.

I appreciate the advice about 6 months. True on bankruptcy not helping, but it would be a silver lining for me if I lost my job, as I would make too much to file Chap 7 while employed...

[avokshi]

Another Angle

http://www.bkforum.com/archive/index.php/t-56187.html

Six months sounds wise, but then I am also hearing that as long as it is after 6 month look back (just after filing), it could be OK...to have that withdrawal...

Then again, I would probably have to be unemployed for six months before filing...

The $30-$50k would be net of an existing 401k loan and 20% taxes on whole. The state, local and 10% penalty at tax time don't scare me, as I was lucky to get an 80% match on my contribution, so my principal is not really touched, and it all just becomes like income instead.

[AngelinaCatHub]

I believe it to be very foolish to cash out a 401K. It is protected under bk rules. You do not HAVE to cash it out if or when you get fired. You must not take direct handling of the funds but have it transferred fund to fund. Put it into an IRA directly without personally receiving the funds to avoid taxes and penalties. It is also easier for one to get a job when they have a job. If you feel so strongly that you will be sacked soon, why not start looking now. You may even avoid bk. Bk is an out of last resort, not estate planning.

If you make enough money now that bk would not be allowed, you must do work that is important enough to be in demand elsewhere. What gives you this strong idea that you are going out the door? More info would help for more advice/opinion.

Also, you may have a problem sending that kind of money outside of the Country. Due to druggers, and those who wish to hide assets from the law, there are strict rules on how you send money of 10k. Sorry about your loss of house and Dad. 'Hub

[AngelinaCatHub]

Also, when you have this cash in hand, it becomes part of your estate. This can be looked upon as avoidance and fraud when found out by the Trustee. There is no real time limit if fraud is suspected and they could look back years. If you HAD done this two years ago, I would think that would be ignored, but even a year and half, could be looked at as an orchestrated bankruptcy. It also then could be gotten back by the Trustee by avoiding the transfer and taking the money to disburse. Then you would lose it all.

I would think long and hard about cashing in a 401k, and I advise anyone with the same idea. Retirement age comes faster than you think. 'Hub

[DebtHater]

The $30-$50k would be net of an existing 401k loan and 20% taxes on whole. The state, local and 10% penalty at tax time don't scare me, as I was lucky to get an 80% match on my contribution, so my principal is not really touched, and it all just becomes like income instead.

While I'm not a tax adviser, I'm almost certain that whether it's the principle or not you will be responsible for taxes and penalties on the complete amount withdrawn. Depending on your tax bracket you complete liability, with penalty could exceed 40% of the amount withdrawn. In retrospect, would you take out a loan at 40% interest? This is similar to what you want to do. As Angelina said, retirement does come fast. That's a lot of money you will lose not including the compounding interest.