What is the penalty for liquidating 401k

02 Feb

Even after the tax penalties, my calculations show me that I’ll get about ,000 out of one of them, leaving me with a little under ,000 in credit card debt which I could eliminate by the end of the summer. Given that she still has K in a 401(k) indicates that she’s putting a pretty heavy amount into them each month.While this move will obviously hinder retirement, it isn’t a complete disaster.In addition, you may have to pay income taxes on those withdrawals.To withdraw earnings without paying taxes or penalties, you must follow very specific rules.So what happens if your family suffers from a sudden job loss, medical bills or damage to your home?In times of need, those without a liquid emergency fund sometimes view their 529 college savings plans as a source of cash. According to Joe Hurley, CPA and founder of Savingforcollege.com, with a 529 plan "You're not locked in, you can get at your money, and if your account has losses, you have some flexibility." Yet there are generally consequences of withdrawing from a 529 plan for purposes other than paying for college.Because your contributions are always made with after-tax dollars (you already paid income tax on that money), you can withdraw your contributions before retirement without having to fork over cash for taxes or penalties. Any money in a withdrawal that exceeds the amount of your original contributions is considered “earnings” and is subject to possible penalties and taxes.

RELATED: Top 10 financial mistakes Millennial parents make A good rule of parenting is to expect the unexpected.

A good rule of parenting is to expect the unexpected.

Yet, according to Bankrate, only 22 percent of Americans had enough money saved to cover six months of expenses in the event of an emergency, and 29 percent had nothing saved.

I have my financial life in order now and I’m spending much less than I bring in each month.

I am considering using one of the 401(k)s to pay off debt.