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My DH has been signed up for shared work, which is a type of unemployment. If work continues to get slow, which we think it will, he could even be laid off.
We owe on our house, our van and siding.
We have about $8,000 in his 401K plan. We did have double that a year or so ago. :(
so we are wondering about taking it out and using it to pay off our van. Then if he gets laid off we would have a payment out of the way. I think we would have about 4,500 left after taxes?
Is anyone else doing this?
Our other option is to use it to make house payments ahead. If we can't make payments on the van, we just lose the van. If we can't make payments on the house, we lose the house. So what to do??
we do not owe any doctors right now, or credit cards, and our propane is paid up.
any advice??
Generally it's not recommended to take the money from your 401K--on top of taxes you have to pay a penalty (I think it's ~10%) unless he's old enough that he could retire. Plus then you've got to get that much more money back in the 401K so that it can continue to build up for retirement. If it comes to losing your house then I could see choosing to get your money there, but I'd consider other options first.
For starters, I would talk to your lender about your mortgage--many lenders are willing to work with you--maybe you can get your interest rate reduced or something along those lines. There are a lot of programs these days trying to prevent more people from losing their houses so I would definitely find out what your options are there first before doing the 401K.
And is the van a 2nd vehicle that you could consider selling? If it's your only mode of transportation then I wouldn't sell it, but if you've got another car then I'd sacrifice convenience before the 401K. Or depending on what you owe on it vs what it's worth, could you consider selling it and using the proceeds to buy a cheaper car that you could pay off in full vs having the loan?
wow we checked our 401K last night before bed, and this morning it is $300 less! Right overnight!
we do have two vehicles, we thought about selling one, but we have three kids so we really need both vehicles. We have too many dr, dentists and errands to make it on one. We have a son that is disabled, and we will be homeschooling our girls in a couple months.
DH uses the other for work, and is gone alot. Of course if he gets laid off, his vehicle could be free to use. If we sold it we could get about $4,000. The thing is replacing it later on would cost more and mean another payment again. So I think we should keep it. It has low mileage, and we take care of it, so it should last us a LONG time. We only drive it around town.
The house interest is only 5.5 % and refinancing wouldn't be worth the paperwork. Also it would probably mean another appraisal.
Talking to the lender could jeopardize our future credit with them?
Good morning! I was curious about my retirement fund and doing some cashing out. The accountant said I would have a 10% penalty in addition to taxes not paid on that in the previous years. Everyone in the financial industries keep saying to hang on and not to cash in retirement funds. I don't think talking to your lender would jeopardize your credit.
I don't think we would owe much in taxes as our income is too low anyway.
And with three kids. I guess I would have to talk to my CPA to see what she thinks we would owe.
If you do cash in the 401K I would at least wait until your husband actually gets laid off, or the work that he's doing stops being enough to make house/car payments--if you're still scraping by right now I wouldn't take that step yet, to me it's really a last resort. As far as the house, I would wait until you're getting to the point where you think you're going to have to miss payments (but haven't missed one yet), then the lender can take steps to help you. There are other options too besides refinancing--they can spread the payments over more years, or let you miss some payments and make them up later and probably other options too. Certainly just talking to them won't affect your credit score, the only potential impact of letting them know you've hit some hard times would be if you've got a HELOC with the same lender then they may cut off your access to that line of credit, but to me that's a better option than missing payments. And if they are able to modify your loan terms in some way, as long as you continue to make your payments I don't think it would affect your credit score.
We had a HELOC but the interest was really high so we closed it. that was a year or so ago. We had to talk to the bank once before about our payments, when we sold a house and bought a new one, we had two payments for a few months. They reduced our payment alright. BUT the only thing we were actually paying each month was a ton of fees and interests and such. Nothing toward the principal and then at the end of the allotted time, we had to come up with a big chunk of money to do it again. Beware of that scam! But that is the only way we could get them to finance two houses at one time, EVEN though we had the money to make regular payments, they wouldn't set it up that way.
I think that waiting until he actually loses the job altogether would be a smarter plan under NORMAL conditions, but with the market being so bad, there may literally be nothing left to take out by then?
I looked this morning and a year ago we had almost $20,000... more than I thought we had. But now, it is only $7 something and less everyday! for real!
This really stinks.
With the house, this would be a completely different situation--what you had before with the 2 houses was probably a bridge loan or something similar--that was always a situation that they would take advantage of you. But this is a different situation, and the mortgage world is different now too so I wouldn't let that bad experience stop you from invetstigating options this time around. I know that a lot of people are focused right now on preventing people in exactly the situation you're in from losing their houses so you may have more options than you think.
And as far as cashing out now or not...you never know what direction the market's going to go, they always tell you never to try and time the market and I think that applies here as well. To me it comes down to whether you're positive you're going to have to cash it out--if you are positive of that, then I doubt the market's going to go up significantly anytime soon so it's not a bad bet to cash it out now instead of waiting. But I'm still not convinced it's the right thing to do--if it were me, I would look at what all extras I could cut out, sell the extra car, do without conveniences, etc before I would cash in the retirement savings. It's a personal decision though, but I just look at for that $8000 you probably lose a few thousand to penalties and taxes, then in order to get back to where you were for retirement savings you've got to get $8000 back into the 401K, and if the market starts going back up in a year or two then you'd need to put even more than the $8000 in to be in the same position 10 or 20 yrs from now as you would have been if you'd never taken the money out in the first place (there's a good chance in a few years, that money would be back up to the $20000 you had before, and think how long it'll take you to put that money back in). That's why they always tell you not to cash it in--you could lose $20K, $30K, etc in the long run for the sake of getting $5K now. Of course there are situations where you might be willing to lose that amount for the sake of cash now, but you really need to think hard about the consequences before you do it.
I think what it would come down to for me is whether this money will solve your problems to the extent that you can get by indefinitely if your husband is laid off and not able to find something new. If you can easily make the house payments on whatever other income is coming in, then it may make sense to pay off the van with this money. But on the other hand, if this is the "finger in the dike" and 6 months or a year from now you're going to be unable to make the house payments if he's still unemployed, then I would leave the 401K alone and talk to your mortgage lender instead. I wouldn't cash in your retirement as a stopgap measure--if it truly solves your problems in the long-term then do it, but otherwise I wouldn't.
