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>> My H wants to take 15k out of his 401k and be done with it. He says we are still young and we can still make it up. >>
I was watching Suze Orman's show recently, and she had someone who wanted to do this. The woman was in her early 30s and wanted to take money out of her 401K to pay off $22,000 in cc debt, just to be rid of it.
Suze said NO, and here's why - taking money out of a 401K now, instead of at retirement, means you'll have to pay penalties (state and federal) plus taxes which will equal about 35%. So in order to end up with $22,000 (to pay off her cc debt), she would actually need to take out about $35,000 from the 401K! So it would cost her $13,000 to pay off that $22,000. Not worth it.
And if that isn't bad enough, look at what you lose by not having that $35,000 in your 401K for the next 30-40 years, earning money for you like it should be. At at average rate of return, that $35,000 would turn into around $353,000! So that's what it's *really* costing you. Tell your husband that and see if he still wants to do it. ;o)
Suze said we need to stop looking at our 401Ks like their our piggy banks/savings accounts. They're for us to live on in *retirement.* |
Agree with poster above. DO NOT take $ out of 401K...sm - ex animo
