401k withdrawal

[sager1966]

Alright, I need some help. Unfortunately, I am changing jobs and will be withdrawing my 401k from my current employer. I have approx. 10k in it and intend to put half of it in savings to cover my ass until my pay equals out on my new job and the other half, not sure what to put it into, thinking of an IRA Roth but like I said, unsure. And besides that, my other question is, would it be better to withdraw it now before the end of the year or wait until January ??? I know either way I will take a withdrawal penalty. Any help or advice is greatly appreciated. Thank you

[sweeps]

It doesn't make any sense to withdraw from your 401k just to put it in a Roth. If you really need some extra cash and you must withdraw, put it in a high-yield savings account.

If you think your income will be lower in 2008 than it is this year, then you're probably better off withdrawing next year. It won't help reduce the penalty, but it could help reduce the amount of taxes you will pay.

[Hypersion]

If you withdrawal from your 401k you have to pay taxes and penalties on the withdrawal.

I would recommend rolling over the 401K into an IRA.

[bjl584]

Why do you have to withdraw it? Doesn't your new employer offer a 401K that you can roll over your current on into?

[cantretire]

Why are you withdrawing as opposed to rolling it over? You'll lose about 40% of it in penalties and taxes.

[Tree0164]

You want to do an IRA roll-over. Contact a new brokerage firm like Fidelity or Vanguard and ask them for the paperwork.

Don't use it to live in... you would get hit with almost 40% taxes. Not worth it.

[disneysteve]

Just another agreement. DON'T cash out your 401K. Roll it into an IRA. Don't pay the penalties and lose what you've worked so hard to save.

[Exile]

sager1966, listen to the wisdom of a fool: In the early 1980's, I withdrew a small portion of a pension payout from my employer instead of rolling over the entire amount. (This disbursement to employees was due to a change in company ownership). I paid through the nose in tax penalties that year, and on top of that I lost interest income on what would have been a larger principal for several years after.

Yes, I know it's not exactly the same as a 401(k), which didn't exist at that time, but the consequences are the same. So please think twice before touching those funds.

And if you don't want to take my word for it, as Cantretire posted, you'll lose about 40% on the deal. Is that what you really want?