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re: Little brother in a predicament
Posted on 5/23/22 at 1:09 pm to Newrow
Posted on 5/23/22 at 1:09 pm to Newrow
The predicament is having both student debt AND credit card debt
Credit card debt is idiotic and tells everyone that you have no idea how to manage money. Then you confirm that by saying it’s a good idea to cash out on a 401k at 27
Credit card debt is idiotic and tells everyone that you have no idea how to manage money. Then you confirm that by saying it’s a good idea to cash out on a 401k at 27
0
Posted on 5/23/22 at 1:09 pm to Newrow
quote:
I said it’s a good idea.
Why do you think this is a good idea?
Posted on 5/23/22 at 1:09 pm to Newrow
How would you expect anyone to give you advice? Provide some details.
Posted on 5/23/22 at 1:09 pm to Newrow
quote:Because he's going to take it in the pooper between taxes and penalties, that's why.
Why
Posted on 5/23/22 at 1:11 pm to Newrow
Because you're going to get tax-raped if you cash out your retirement accounts early, not to mention you are throwing away the earning power. You don't want to start over with retirement savings in your late 20s if you can avoid it.
Posted on 5/23/22 at 1:11 pm to Newrow
quote:Never touch a retirement account unless is the last of the last resorts IMO. If he has so much credit card debt at some crazy high rate and has to be homeless or some shite, then yea.
My brother is leaving his current job of 5 years at the age of 27. He is thinking of cashing out 401k, PTO, and an alternate Roth Account he started. He wants to pay off student debt and credit card debt with extra cash on the side. He is starting a similar job to what he has. I said it’s a good idea.
Otherwise just tell him to work hard, save up and pay his shite off separately.
Posted on 5/23/22 at 1:11 pm to Newrow
quote:
I said it’s a good idea.
Why is it a good idea? There are hefty penalties for cashing out a 401k early, and Roth too I think.
Posted on 5/23/22 at 1:12 pm to lsuwins3
quote:
Does he know that using 401K will be 40% off the top. 30% taxes and 10% penalty.
That's just the feds.. The state is going to want their slice of that pie as well, since they didn't get to tax it the first go round. Depending on what state that could be substantial as well.
Posted on 5/23/22 at 1:12 pm to LSUBoo
quote:All this. The tax/penalties are a big deterrent but even without it, you don't want to make a habit or even 1 time thing of taking out of retirement just to pay off a couple of bills.
Because you're going to get tax-raped if you cash out your retirement accounts early, not to mention you are throwing away the earning power. You don't want to start over with retirement savings in your late 20s if you can avoid it.
Posted on 5/23/22 at 1:12 pm to Newrow
quote:
He is thinking of cashing out 401k
quote:
He wants to pay off student debt
Student loan interest is tax deductible but cashing out the 401k will add taxes and penalties. Just on the surface, doing this for this reason isn't great.
He should talk to a professional.
Posted on 5/23/22 at 1:12 pm to Newrow
He'll net red on this strategy on penalty and taxes alone.
Posted on 5/23/22 at 1:12 pm to jchamil
quote:
Why do you think this is a good idea?
Why be a slave to debt if you can pay it off in the short term?
Posted on 5/23/22 at 1:12 pm to Newrow
First of all, "throw" really isn't as complicated as you make it out to be.
Second:
If he's going to be paying off debt with "extra cash on the side" why would he liquidate his investments?
BTW, my ex-wife used to speak of this mythical beast known as, "extra cash". I've never seen it, and don't believe it actually exists.
Second:
quote:
cashing out 401k, PTO, and an alternate Roth Account he started. He wants to pay off student debt and credit card debt with extra cash on the side.
If he's going to be paying off debt with "extra cash on the side" why would he liquidate his investments?
BTW, my ex-wife used to speak of this mythical beast known as, "extra cash". I've never seen it, and don't believe it actually exists.
Posted on 5/23/22 at 1:13 pm to Bunta
quote:
Sounds dumb. Tighten your belt, pay the debts off, and leave your retirement account alone.
Especially when one of the debts is credit card debt. Very rare that would get paid off and not run up again.
Posted on 5/23/22 at 1:13 pm to Newrow
On the 401K he will get hit with an early withdraw penalty (10-20%% usually) and pay taxes om the money.
Posted on 5/23/22 at 1:14 pm to Newrow
quote:What do you think the huge tax and penalties for pulling money from your retirement account is?
Why be a slave to debt if you can pay it off in the short term?
When you factor that, and the lost money drawing interest, he's not coming out ahead by paying off a credit card.
Posted on 5/23/22 at 1:14 pm to Newrow
quote:
My brother is leaving his current job of 5 years at the age of 27. He is thinking of cashing out 401k, PTO, and an alternate Roth Account he started. He wants to pay off student debt and credit card debt with extra cash on the side. He is starting a similar job to what he has. I said it’s a good idea.
Why in God's name would you cash out the Roth or the 401-k when the market has just taken a giant shite. On top of taking max tax out he will get penalized for being under 55 y.o. on the 401. Cash out the pto. DO NOT cash out the 401-k or the roth unless there is next to nothing in them.
Posted on 5/23/22 at 1:14 pm to Newrow
I'll never understand how anyone in their right mind can accrue credit card debt for anything other than necessities in a dire situation.
Posted on 5/23/22 at 1:16 pm to BobLeeDagger
quote:Yep
I'll never understand how anyone in their right mind can accrue credit card debt for anything other than necessities in a dire situation.
I did it when I was young and dumb and got my 1st cc. Racked up about $5k, wasn't making much money so it took time to pay it down and obviously paid a lot in interest.
But that was all done before I was probably 23. Then, never again. I own 1 CC, put everything on it and pay it off monthly.
Posted on 5/23/22 at 1:16 pm to Newrow
quote:
I said it’s a good idea.
What? Penalty and taxes are going to cost him dearly. He is also cashing out at the bottom while the market is in the tank. What terrible advice. I mean, just absolutely moronic advice.
Quit putting into his 401k going forward and allocate to debt, fine, but to cash out with taxes, penalty and at the market bottom is just dumb.
This post was edited on 5/23/22 at 1:24 pm
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