The BIGG Successs Show
I Need Money! Should I Cash Out My Retirement Plan?
How you pay by cashing out your 401(k). Find a written summary of today's show along with a link to the FINRA study we reference at BIGGSUCCESS.COM.
Welcome to The Big Success Show. Today, we'll answer the question, "Should I cash out my retirement plan if I need money?" The Big Success Show with George and Mary Lynn. Boy, Mary Lynn, it's news is all gloom and doom these days, isn't it? When it comes to the financial news, yes. It's pretty tough. They talk about we're not in a recession. Here in the US. Yes, but if this isn't a recession, then it's kind of amazing how tough things are, right? You know, fuel costs are going up, which means that groceries are going up, and there's falling home prices, and the stock prices are all over the place. Yes, they are. It's rough. Well, on top of all that, credit's tighter than ever, it seems like. We've seen a bank run lately, so to speak. It's just incredible. Things that I almost thought I'd never see in my lifetime. And I got to tell you, no matter how rough it gets, we still got to pay those bills. That's right. And if I could find Bill, I'd pay him. But, you know, people are responding to this in a number of very intelligent ways. I heard the other day that Amtrak usage, for instance, in one particular city, I don't remember which one, but a major metropolitan area was up like 30%. Yeah, I've got a friend that lives in Chicago, and he says, "The CTA is my friend." Yes, and using public transportation. Absolutely. I think people are eating out less. They're, you know, seeking cheaper forms of entertainment, kind of cutting back on the lattes and other things, as David Bach would say. Right, but even if you do cut back and tighten the belt, so to speak, what happens if you still need cash now? Well, and one of the things that's really tempting, especially if you're in the midst of a job change, which a lot of people are, is the pull money out of your retirement plan, your 401(k), let's say. We found a statistic that's pretty interesting. From FINRA, the Financial Industry Regulatory Authority, and they showed that about 40% of people in their 20s and 30s have done just that. Yeah, and that's a pretty startling statistic, isn't it? I think about that. Two out of five people basically in their 20s and 30s are completely cashing out of their retirement, and it's just not a good idea. It's really something you should only do as a last resort. Because if you're under 59 and a half, you're gonna pay, pay, pay for doing this now and later. That's right. And we're gonna tell you just how it will cost you coming up. Today we're talking about cashing out your retirement plan. Is it a good idea? And we've got an example of this that shows exactly how it really does affect you and your future. Well, let's say you're 30 years old. I wish I was only 30. You're 29, right? Yeah. Yeah, exactly. And you're 30 years old with $20,000 in your 401(k). And if you leave it alone at 6% until you're 62, that's gonna equal approximately $130,000 in your retirement plan. That's a nice little chunk. And that's without any additional contributions. Yeah, and now, of course, you could always start over. But the thing is, when you start over, you lose that compounding power of money. And that's something really important to understand is that money makes money and then that means more money, which means more money is making even more money. And with a retirement plan, it's all accumulating tax-free and it means significant amounts of basically financial security. Well, here's another thing that'll hit you. If you take money out, you're gonna pay income taxes now on that money plus a 10% penalty. And also keep this in mind, you're probably gonna get less than what you're thinking because your employer is required by the IRS to hold 20% toward those income taxes. So $20,000 that you think you might get is probably gonna be closer by the time all said and done to about $14,000. It's just like your paycheck. You're like, "What?" Technically, the government is taking so much. And the thing is, if you owe money, your creditors can't touch your 401(k), but as soon as you pull it out, they can. So that what we're saying here is cashing out is a short-term solution, but it has amazingly large long-term consequences. - You can get a written summary of today's show on our site at Big Success. That's bigwith2gsuccess.com. We also have a link to that recent study by FINRA on our site today as well. - Next time, we'll ask, "Do you DWD?" - DWD. - Yes, drive while distracted. - Oh, guilty. Until then, here's to your Big Success. - The Big Success Show at BIGGSuccess.com. [MUSIC PLAYING] You