Has anyone chosen to withdraw their 401k funds (and not roll them over)?
I am considering withdrawing my entire savings - I'm fully vested.
Any time this topic was discussed during the SIRP info sessions, they mentioned a 'potential' 10% penalty for withdrawing the funds.
Have any of you experienced this? Were you penalized the 10%?
Thanks
The 10% penalty is an IRS rule and is age dependent. This is not a Ford rule. Its best that before withdrawing anything from your 401K, educate yourself by searching online for the 401K withdraw rules then you can make an informed decision yourself and not have to ask here.
18% is a pretty healthy decline. Pretty sure most everyone can relate to something similar, especially if the 401k isn't self managed.
Did you know that some people didn't lose even a dollar in this decline since December? Shifted assets in November, waiting and watching for the decline to take hold. Those that didn't see it coming back then, won't see what comes up next either.
But, try to have some fun with it.
@2aqb+1jhs8UZJ There's a lot of other investments in our 401K than Ford stock. I did not ride Ford stock down because I do not own any. I haven't owned Ford stock over 15 years. My account is down 18% YTD, and it is still 7 figures. If you are investing in only Ford, then you may want to ask Financial Engines to help you diversify your account.
Spoken like a financial genius. Did you ride price down from $25? Will you ride it down more? I think so.
to @2acc+1jhs8UZJ, You clearly know nothing about investing. Stop trying to put fear in people!
If you are 55 and worked at Ford 10 years you can take withdrawals from your 401K under the Rule of 55. Ask a FP about it.
https://www.investopedia.com/rule-of-55-5324286#:~:text=The%20rule%20of%2055%20is%20an%20IRS%20rule,to%20retire%20early%20or%20for%20any%20other%20reason.
Have you ever considered that you might be living through depression 2.0? Has that thought ever crossed anyone's mind, or has the idea of buying the dip been backed in?
There's a time and place to take 401k withdraw, even with the penalty. That was when the market was at the peak, and Ford was at $20-$25 a share, and you could take a draw due to Covid - free of the 10% if affected by Covid related issues. I shared numerous post how this market is coming down, four in fact, and most people were not believers even back at $25. I made sure to remind them, and they watched their portfolios continue to fall in value.
You are where you are, due to you your intellectual accumulation of knowledge, or there lack of. The question you should be asking yourself right now, is, does the market recover, or are we in a depression 2.0 type of decline? Should the second occur, it's another 50% loss.
I will give you one hint that you may not understand unless you chart or understand TA. There exists a gap in the Ford charts at $5. If your timeline to weather that storm is considerable, then you should be fine. If you approach retirement age, you might have a concern. I've known people that had 80% of their 401k's literally evaporated, at the timeframe they intended to retire. It's shakes things up a bit deciding what to do.
In a down market what to do is re-balance your allocation. It is also a great time to do a Roth Conversion if you can pay the taxes with other savings. The market is down. Most likely so is your account unless you sold before the first of the year. If you convert to a Roth may benefit once the market starts to recover. Like someone above said, don't do it unless you need the money to survive.
I recently withdrew my voluntary contribution. I turned 59 1/2 and rolled it over without having to pay any tax penalty. I had that money sent to my retirement planner account.
Once the paperwork is complete it will take about 4 weeks for a paper check to arrive at the firm handling my account.
Same goes for the LUMP SUM. That money took 6 weeks before it showed up in the form of a paper check. There is another check with it that is nontaxable. That is part of that 1 1/2 % you put in after one year of employment at Ford. often referred to as the BRIDGE.
When you speak to a NESC rep. whatever you do keep the same person. Hope this helps?
OP here. Thank you all for your input. Fortunately, I am not in dire straits and can survive without touching the money. Thanks again everyone.
I take it you were let go in August and are not retirement eligible. Don't cash out your 401k now. You will get creamed with taxes and penalties.
Do the calculations. You will be paying the 10% penalty on top of additional taxes based on the additional income from the withdrawal. It will probably put you in a much higher tax bracket too. I made a withdrawal of approx. $200K from my IRA and ended up paying around $100K in taxes (California state + Federal) from that withdrawal alone. This big tax bill is on top of all the payroll taxes already taken out (based on zero exemptions too). But then I did not have many deductions at the time so I had to take the standard deduction. I had to do it because I really needed the money. Otherwise, I would not have touched it.
No, I have Never thought to do that! That would result in a HUGE tax bill. My balance is 7 figures. Why would you want to do this? Are you concerned because the market is down and you want your money out? If that is the case, just move it to the interest income fund. Don't withdraw your money. As others mentioned. You should consult in a financial advisor.
Why would you want to do it?
Like others mentioned there is penalty if you withdraw before the age of 59 1/2.
Best to discuss with a good financial planner in such situations.
https://www.forbes.com/advisor/retirement/rule-of-55-retirement/
If you are 55 or older when you leave Ford, you can access your Ford 401k without 10% penalty.
If you are under the age of 59-1/2 you will have to pay a 10% penalty, and then 20% will be taken out for Federal taxes, and you will owe 4.25% Michigan state taxes.
Instead of withdrawing the funds , you should open an IRA at Fidelity and ROLL the money over to the IRA, there would be no penalty or taxes if you roll the money over.
https://www.fidelity.com/
You can open an account online at Fidelity, or go to one of their offices and they will do all the work, including the roll over for you.
DON'T DO IT. It is the worst time to withdraw from so much beaten down 401k, pay penalty, and pay taxes... NOT A GOOD MOVE.
Unless you ABSOLUTELY NEED the money, the best thing is to "ride the wave" right now. Everyone is dealing with a plummet in the stock market. It is only when you cash out when you actually realize the loss.
If you under 59 1/2, you'll not only pay a 10% penalty for early withdrawal, but your withdrawal will be considered income, thus (most likely) bumping you into a higher income tax bracket.
If you're into podcast, start listening to Dave Ramsey. He'll talk you out of withdrawing your 401k. Instead, he says, "stocks are ON SALE right now," so continue to invest. The market always comes back.
Unless you’re totally backed against a financial wall - don’t do it. The tax penalty and permanently locking-in this year’s stock market losses are a ki---r.
I spoke with NESC about this. I was told that the 10% penalty applies to anyone under the age of 59. I was also told that it would be in the form of a tax.
So, basically, you could choose to withdraw all your funds from your 401k account and they would be provided to you (either direct deposit or by a check mailed to you). Then, in January 2023 you would receive a 1099 showing the full distribution amount. Then, when you filed your taxes, you would have to pay the 10% per that distribution amount.
10% and taxed own based on current income
You are looking at least 20% giving away