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      11-24-2019, 08:24 AM   #14
zx10guy
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To pile on. When you cash out any portion of your 401k that doesn't fall under any exemptions/approved withdrawal circumstances, not only are you going to be hit with an immediate 10% penalty on the amount you take out (so you're not going to get the full amount you had planned to take out), that money becomes ordinary income which is added to your current year's income total. Depending on where you fall in your tax bracket, this can also have a major tax implication.

As others have stated, it's always prudent to at least contribute enough to gain the full company match. That's free money and an immediate return before any stock market gains. While the scales are a bit different in the amounts we're talking about here, I have an IRA account at a financial institution. I have not contributed to it at all since creating the account in 2013. In 6 years, it's more than doubled in value where the beginning balance was in the 6 figures.

I was in your very situation when I was in my 20s. At a job that I didn't think would lead any where. Set my eyes on the exploding IT market. Decided I wanted a specific training path/certification. I worked with the education institution to break up the lumped sum payment they required to get the upfront payment discount into a few payments. Which I dropped onto a credit card and managed out the payments from there. Never touched my 401k and was able to get the classes paid off without too much of an interest hit. There are ways to make this work as others have provided suggestions. It just takes you to be creative and think outside of the box a little.

Edit: I actually think I remembered the penalties for taking out money from a 401k incorrectly. From what I remember, you get hit with a 20% automatic withholding from any amount you take out upfront. Then at tax time, you are hit with a 10% penalty on the total amount and then will have to pay taxes on that amount at ordinary tax rate when it's added to your total income for the year.
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Last edited by zx10guy; 11-24-2019 at 09:18 AM..
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