Situations where cashing out 401K makes sense

[reneeh63]

Sorry - it sounds like you're rationalizing this and you just want a big pot of money to play with. Chances are you will fritter it away while you're looking for that great opportunity that will never materialize. And you WILL lose a very large portion to taxes - you'd have to make all that up just to come out EVEN! Keep it invested...maybe in a riskier fund, but keep it in play, ALL of it!

[numberfive]

ecsdude - how do you plan on beating countless professional investors? Sustained lucky choices? Or with many many hours of investing education?

Either way, I wish you the best of luck. Me? I'm leaving my money in the market. There's no reason to think it'll lose value over the long term, only gain. But if it loses money for the first time in all of known history, then we're all screwed anyway. So I stay invested, can't wait for the next big upswing.

And just for fun, here's what would happen if you were the world's worst market timer:
What if You Only Invested at Market Peaks?
Spoiler alert: you'd still gain money.

[jghorton]

Originally Posted by Lowexpectations

In many cases? Not really. If it's allowed at all its typcially restricted to employees 50+ or a length of service plus age. In many cases doesn't really fit the reality of it

My plan and others I'm aware of allowed it. It doesn't hurt to ask -- After all, the money belongs to the owner, not the company.

[ecsdude]

Hi, I'm not talking about day trading or anything like that.. I don't have any experience with that so wouldn't want to risk it.

What I'm talking about is having the liquidity so that if/when opportunities arise (I was thinking more along the lines of: (a) real estate downturns like that around 7 years ago that led to homes being sold for rock bottom prices and now have appreciated considerably - if I had the down payment to pursue opportunities like that, I'd be doing pretty well selling at what appears to be the peak now (b) consistently finding good deals on electronics and other goods and making regular profits on resale.

Both would have to be done with care, and aren't as passive as just leaving the funds in a 401K, but I wonder what the environment will be like by the time I retire. Will we have hit a market meltdown that resulted in some of my coworkers losing like 200K on their 401K? If so, then what? It seems that at least the other options would give me more control over my own fate.

But I understand that over the long run the 401K historically trends upward and that cashing out would mean first making up a significant amount that will be going to taxes and penalty... before even starting to realize increases.

Based on the majority of responses, I'm leaning towards taking the safe route and roll my 401K over to the new employer, continue to contribute (even without a match) and try to increase my contributions and savings, and find jobs that pay more, as ways to build wealth.

[newnewyorkers]

Check if you can simply leave it where it is. There is no need to even roll over to an IRA. i have my pepsico 401k money still there bc their investment choices were very good. So no point in taking it out anfpd going though all the hassle. Now, i wouldnt want to have 5 401ks from 5 different employesr laying around, but for now, you actually may nit need to "do" anything. Just visit the site frequently and see how our money is doing.