Should we cash out our 401k and leave the stock market?

4 Replies

Hello, I’m looking for feedback from anyone who has ever cashed out a 401k early to lock in that first deal or deals. My wife and I have around 100k in our 401k accounts and I’m considering pulling it out and taking the 10% penalty to lock in our first few deals. I do not want to borrow against it as our company is a bit shaky and I’m not confident our roles are 100% secure. We are 33 and 29 years old. Also, my wife and I are both 100% on board for getting into buy and hold. Should we even continue to put money into our 401k? Just looking for thoughts from all of you smart folks! :)
I cashed out my 401k to invest in real estate. It worked out well for me but there is a lot of risk in doing it. I would exhaust all other options first
I cashed mine out as well and it was a good decision at the time. You'll only receive about 70% of the total after 10% and 20% to cover taxes. So if you can make +30% on a property it makes sense. Probably pretty hard to do at this point in the cycle, like Jason said I would exhaust all other options.

Best to lock down a great deal before cashing out. Paying those taxes will hurt. On the other hand it's why real estate is great because business expenses, and depreciation limit the tax liability every year.

I would still prefer to borrow over withdraw. If you withdraw you wont get much more than $50k anyway after taxes and penalties. If you withdraw you definitely pay the penalty, if you borrow you MAY have to pay the penalty.

Be aware the tax laws changed on this too. If you lose your job you have until the next tax returns are due before you are in default. So if you lost your job in July 2018 you have until October 2019 to pay back loan (with 6 month filing extension). That gives you over a year to get as much money as you can back into 401k.