Cash Out My Retirement?

Updated on July 22, 2010
A.P. asks from Norwalk, CA
14 answers

I have 15k in my account and was considering cashing it out and putting it in my savings account. I'm self employed now and cant roll it into anything. I can leave it there, but feel like its only 15k and could use the cushion. What are your thoughts or experiences?

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answers from Dallas on

If you don't have to, I would leave it for now. I actually help people with a Plan B - financially. Contact me at [email protected] for more details. Would love to discuss.

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answers from Los Angeles on

Notice everyone says to leave it there in your IRA or SEP IRA. Talk to your accountant or tax preparer. I moved my retirement into a self directed IRA. I bought a stock, (NLY) paying a 15+% dividend recommended by Jim Cramer of Mad Money on CNBC.

I was a finance major in college. My company offered to pay me $1100 per month as a retirement check and when I die that ends the checks. By investing 50% of the money they will give me for cashing out my retirement account in an IRA I will get $1162 per month and my wife gets the account when I die. I do not pay any taxes on the dividend until I take the money out. My CPA is going to help me convert it a little at a time so I can put the money in a ROTH IRA so I can take it out tax free. The other 50% I'm going to invest in dividend paying stocks that have a good chance of appreciating. I expect to make at least 7% on those stocks.

They teach you a very elementary rule when you are a finance major. Its called "The Rule of 72". Any two numbers multi[plied together that equal 72; one is interest and the other is the number of years it takes for your money to double at that interest rate. Example 6 X 12 = 72 If you get 6% interest, it will take 12 years to double your money. This assumes you reinvest the dividends. Try to find DRIP stocks. DRIP = Dividend Re Investment Program. These are companies that will take your dividends and buy more of their stock and you don't pay any commissions to do it. NLY (stock symbol) currently pays a 15.5% dividend. NLY is a DRIP stock. If I have them reinvest the dividends for me my money will double in every 4.64 years (about 4 years and 8 months) in the IRA.

Rule of 72 Example: $15 K invested at 15.5% will be $30K in 4 years and 8 months. Your $15K will be $60 K in 9 years 4 months. In about 18.5 years your $15 K would be about $240,000. $240,000 at 15.5% is $3100 per month for the rest of your life. That's a pretty good reason for not taking and spending your $15 K.

Good luck to you and yours.

3 moms found this helpful


answers from Houston on

The fact that you are self-employed is the BIGGEST reason you should not cash it out. As many others have stated, you'll walk away with with less than $10,000...assuming that the $15,000 is FULLY VESTED.

Starting your own business is a risky proposition, and I understand the need for some extra capital, but do you REALLY want to re-start saving for retirement at whatever age you are?

You say "its only 15k" why not just leave it where it is or roll it into a self-directed IRA?

I made the mistake a few years ago of cashing mine out. I walked away with around $10k. I used it to pay off some debts and ended up buying a house. Then Murphy came to visit four years ago. My husband left while I was pregnant. I was stuck not able to sell the house, a daycare bill that was larger than my mortgage, and a struggling single mom. Now I am 34 and still struggling to rebuild my 401k.

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answers from Chicago on

I did that and was taxed thousands of dollars. Better check that out first before you do anything.



answers from Indianapolis on

Any good financial advisor will tell you not to......unless you're facing the loss of your home, etc. The tax ramifications will be ~40%.

It's always best to leave those investments alone until you're closer to their maturity age. My husband did against my knowledge (before we were married to pay down some debt), and he regrets it horribly now.



answers from Phoenix on

If you do anything roll it into a IRA. You dont pay any pentalties (you loose more than 1/2 if you cash out) and you can access a wider range of investments to help it grow. Also if you get n a tight spot you can access a little at a time



answers from Honolulu on

As soon as you cash it out, you will be paying taxes on it.... lots of taxes and you will lose money.

Is it a 401K or a ROTH, what kind of retirement account?
They all have different rules, but generally, any time you cash it out.... it is viewed as a "premature distribution" and you will pay taxes... unless it falls under certain categories.



answers from Las Vegas on

Your 15k won't be 15k after you incur the tax penalty. It'll be more like just a little more than half of that. Are you talk about a 401k account? If so, you actually can roll it over into a tax deferred IRA account and not incur any penalties. I did it a couple of years ago without any problem.



answers from Austin on

It won't be 15 K when you cash out. You will owe a penalty. I cashed out my 401K when I stopped working (about 8 K), but it was worth it to us since I am a SAHM now.


answers from Chicago on

Sadly, after taxes it will be more like 8k. That's why I would leave it alone if I were you. It will keep growing if you leave it there, but you'll have to pay the taxes if you take it out.



answers from Washington DC on

Leave it alone.
They will take most of it in taxes.



answers from New York on

no don't. count it as you don't have it. if you cash it it will be taxes to death. you won't get much out of it.


answers from Little Rock on

DONT'T DO IT!!!!!!!!!!!!!! Uncle Sam WILL ROB U BLIND!!!!



answers from Charlotte on


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