Selling 401k questions
Selling 401k questions
For personal reasons, I would like to withdraw money from my 401k from an account with a company that I currently work for. I have some general basic questions that I hope could be answered. I will check with the company that manages the 401k but just wanted some advice here so that I am prepared.
1) Since I am still employed, would my employer find out about what I sell / don't sell in my 401k account? Is there a way so that they do not find out?
2) I have about half in a Roth 401k and half in a regular 401k. Do both get the 10% early withdrawal penalty?
3) Would a potential option be to borrow against my account for the full amount and would this even be possible since the account is split into a Roth and regular 401k?
4) Would there be any advantages to selling the account vs borrowing the full amount out of it?
Thanks!
1) Since I am still employed, would my employer find out about what I sell / don't sell in my 401k account? Is there a way so that they do not find out?
2) I have about half in a Roth 401k and half in a regular 401k. Do both get the 10% early withdrawal penalty?
3) Would a potential option be to borrow against my account for the full amount and would this even be possible since the account is split into a Roth and regular 401k?
4) Would there be any advantages to selling the account vs borrowing the full amount out of it?
Thanks!
Re: Selling 401k questions
Here's a good summary of the issues involved, such as hardship withdrawals.
Re: Selling 401k questions
Thanks. According to that article, it looks like a max borrow of 50% is the typical. So that would be out. I guess the only questions remain are about selling.
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Re: Selling 401k questions
I dont think your employer would know what you sold and such since they have no control of your investments within your account.
Re: Selling 401k questions
If I log into my 401k, there is a section on loans and withdrawls. Your specific plan should have it's own set of rules and will detail it out for you.
I do not see why your employer would have any awareness unless it is a small company with an inhouse person dealing with the accounts.
I know you said you needed to do it for personal reasons. I would try all other avenues for funds before selling out 401k.
Best wishes.
lafder
I do not see why your employer would have any awareness unless it is a small company with an inhouse person dealing with the accounts.
I know you said you needed to do it for personal reasons. I would try all other avenues for funds before selling out 401k.
Best wishes.
lafder
Re: Selling 401k questions
1) An employer could easily know what your trades are depending on the 401(k) shop. For instance, I think my spouse's 401(k) is run by the son-in-law of the firm owner. It's a small enough firm that any major changes might not be kept confidential. My thoughts confirm what Lafder posted.
2) Yes both would get penalty unless you are older than 59.5 and your plan allows in-service withdrawals.
3) If you plan allows loans (it doesn't have to), one can borrow of to 50% of assets or $50,000 whichever is less. Payback is from paychecks.
4) No advantage to selling over borrowing. My spouse borrowed the maximum from her 401(k) because the fees were so high, she saved money by borrowing and investing the money elsewhere in better funds.
2) Yes both would get penalty unless you are older than 59.5 and your plan allows in-service withdrawals.
3) If you plan allows loans (it doesn't have to), one can borrow of to 50% of assets or $50,000 whichever is less. Payback is from paychecks.
4) No advantage to selling over borrowing. My spouse borrowed the maximum from her 401(k) because the fees were so high, she saved money by borrowing and investing the money elsewhere in better funds.
Re: Selling 401k questions
It's a little troublesome that my employer would have access to that, I'm trying to avoid that scenario if anyway possible. It's not a super small company, around 100.
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Re: Selling 401k questions
Have you made any Roth IRA contributions? Roth IRA contribution basis can be withdrawn tax free and penalty free.
What about stopping 401k contributions to increase cash flow?
What about stopping 401k contributions to increase cash flow?
Re: Selling 401k questions
What you are proposing is a really bad idea and a last resort. I would look into tapping my emergency fund, HELOC, withdraw contributions from Roth IRA, title loan on my car, 401(k) loan before I would even consider paying tax + 10% penalty on a 401(k) withdrawal. You are jeopardizing your future retirement.
Re: Selling 401k questions
Thanks for the replies. Looks like both options don't really fit my case. The retirement company said under my plan I wasn't allowed to sell unless it was for a qualified hardship. I am allowed to borrow 50% but this amount would be required to be payed back starting almost immediately through deductions in my paychecks. And this would require my employer to setup those deductions. Not something I wanted to do.
Re: Selling 401k questions
I think it would be worthwhile to reframe the question as "I need to get X amount of money for a personal reason. What is the lowest total cost source for that money - bank loan, relative loan, downsizing real estate, credit cards, emergency fund, moving to lower rent housing, downsizing car, cashing out 401k, 401k loan, etc etc. etc.?"
The 10% penalty - not to mention potentially, jeopardizing your retirement - makes the 401k cash out a generally a "high cost" source of funds. So, I would highly recommend you ask the broad question explaining what your need is - then putting it back to this group how to identify the source that best meets that need.
The 10% penalty - not to mention potentially, jeopardizing your retirement - makes the 401k cash out a generally a "high cost" source of funds. So, I would highly recommend you ask the broad question explaining what your need is - then putting it back to this group how to identify the source that best meets that need.
Leonard |
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Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? |
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If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.
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Re: Selling 401k questions
It's not your company plan that limits the withdrawals to qualified hardships it's the law (assuming you're not at age 59-1/2 yet).