Question about Retirement Funds

[nomore008]

Our case has been discharged, can we get into our retirement funds now?

[AngelinaCat]

I don't see why not, but what are you trying to do?

[nomore008]

We want to pay off the car.

[Flamingo]

And pay state and federal taxes on that amount and also get hit with a 10% penalty if withdrawn this year by the IRS? Are you over 59 1/2? If you withdraw, you will need to withhold at least 20% to cover just federal taxes, enough to cover your state taxes on that amount and also 10% for the IRS. That is over 30% of the amount you need to withdraw gone before you pay for your vehicle. Bad idea unless you are totally desperate, have no job and no other choice.

[debee]

Another cost to consider is lost earnings. Depending on your investments, that could easily be another 5% per year. Over the lifetime of the fund, that can add up to a lot of money.

[KatieEllen24]

Why do you want to do that?

[nomore008]

We want to keep the car and when I work 36 hours a week we can't afford it and working 50 to 60 hours a week is making me tired and grouchy. We know we have to pay taxes on the money. Didn't know about the penalty from the IRS. And we still owe them money too, for last year.

[nomore008]

We also want to take out enough to pay the IRS (this was not dischargeable) and a medical bill. My husband was hospitalized (again) the day after we filed in Sept of last year.

[KatieEllen24]

Have you thought about taking out just enough to make the payments for awhile? Things might change in 6 months. Take out as little as you need to, you can always take more out later.

[daylate]

I agree with the advice above-take it out as slowly as possible. Also, regarding the IRS - at some point the IRS might be willing to take less than you owe under the "can't get blood from a rock" theory. Depending on how much you owe and what you have available you could possibly settle with them. If you decide to go that route find someone who is an Enrolled Agent or a local CPA to help you. Don't use one of those firms that advertise on TV - many times you wind up paying for nothing (although I do believe the FTC recently came up with some new regs to make it harder for them to rip people off).

[willdufauve]

you might look into an Offer in Compromise w the IRS. i can't post the link so search it.

[Flamingo]

We want to keep the car and when I work 36 hours a week we can't afford it and working 50 to 60 hours a week is making me tired and grouchy. We know we have to pay taxes on the money. Didn't know about the penalty from the IRS. And we still owe them money too, for last year.

That's going to be an expensive car for you to pay off with all the taxes and penalties you have to pay on the funds used to pay off the vehicle. If you were just discharged from a Chapter 7 with no debt or bills, i am assuming you still have cash flow problems and/or job problems that you still can't get back on your feet. Chapter 7 only gets rid of the debt; it doesn't solve those other issues. As to money owed to the IRS from last year - you can easily work out a payment schedule with them to make payments over a period of five years - why spend more for taxes and penalties to pay off more taxes? Touching one's 401(k) or any retirement funds should be a final last resort but, again, it's your money but you will realize down the road you made a mistake in what you did - many on here are trying to warn you. Best of luck to you.

[discouraged]

I am so very sorry I took mine out. I did it to pay bills after I became unemployed. Wish now I would have realized unemployment was going to last for a long, long time. I should have filed at that time, but didn't even think of it until I almost did not have food to eat.

You will never realize that money again and, as everyone says, you lose a lot to taxes. So think hard before you consider
touching it please.