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Author: soontoroam Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76406  
Subject: Re: More 401K help needed... Date: 2/27/2004 10:51 AM
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What are any possible implications to the (very small)company of us taking our money out of the plan?
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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39504 of 76406
Subject: Re: Re: More 401K help needed... Date: 2/27/2004 1:32 PM
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Welcome soontoroam. Glad you could join us.

The best time to take money out of your 401K plan is in retirement usually after age 59-1/2. That way you can take the money out without paying penalties--though you still must pay ordinary income taxes on the pretax contributions and on your profits. (Really you pay on the full value of the distriubution less a portion allocated to your after tax contributions if any.)

The second best way after you change jobs is to roll the funds over to an IRA account. There you have more options to invest the funds for retirement.

The major implications of early withdrawal are--

1. Income taxes and the 10% penality can cost you as much as half of your account value--depending on your tax bracket. However, if you are unemployed and in a low tax bracket, it can be fairly painless. Hence, 401K is not a bad unemployment cushion.

2. You lose out on saving for retirement and all the tax free growth that can happen over the years (the compounding effect) that can make small contributions now grow into large sums in retirement. So you must make other arrangements or you may be dependent on Social Security or welfare in retirement.

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Author: dougdoogle Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39521 of 76406
Subject: Re: Re: More 401K help needed... Date: 2/27/2004 11:57 PM
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>>>What are any possible implications to the (very small)company of us taking our money out of the plan?<<<

There are no implications to the very small company. Unless, of course, you have 10 percent of the company's stock in your 401k and dump it all in one day.

It's your money. Not their's.

Doug

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