Updated over 5 years ago on . Most recent reply
CARES Act 2020 - good time to cash out 401k?
Has anyone cashed out their 401k after the CARES Act was passed this year? Was it difficult? I am considering cashing out and putting it in rentals
cliff
Most Popular Reply
Cashing out to just spend it (even on rentals) is risky in my opinion because you have now excepted the losses your 401k has taken because of the market crash. You are removing a safety net for your retirement as well. Putting all your eggs in one basket in risky. Plus you still have to pay taxes on it...you just dont have to pay the 10% penalty.
With that said though, I'm not against it. I am GOING to completely remove the money in my previous employers 401K but not my current one. I just have to figure out when I'm going to do it. The reason I'm doing it though is not to put it into my rentals or my construction. I am going to switch it over to a Roth IRA. That way it is still in a "retirement" account but it is now in an easily accessible account that has no restrictions or penalties for removing it in the future. I will still only do that in an emergency but I now how that option. Now I might also take some of that and put it in individual stocks that I choose but its still a buy for the long haul and not a day trading type of scenario.
And further detail as to why I'm taking it out of my previous employers 401k is that I only get to keep 60% of their employee match because I wasnt with them for over 5 years...so ist not like its making me more money or get to keep it when I retire and start pulling. But the reason I am currently waiting is that there were rumors that Trump was thinking of waiving income tax (of partially) as part of a stimulus bill. So if that happens then the taxes I would pay on pulling the 401K would go down. If that doesnt happen then I'm still back to where I was. But not paying the 10% penalty is still big enough for me to move it before the CARES Act expires.