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so I may or may not be losing my job soon. Long story. I have some questions about my 401k. I wont be 100% vested until 3 years of employment (Novemeber of this year)
I know its not the "smart" thing to do but if I lose my job im going to have to cash my 401k out.
I have a loan with $800 left to be paid. What happens with that? Will it just be taken out before I cash it out?
Also the vested amount that I do have, ($2688.67) how much do I actually get?
(1. I have already started applying elsewhere)
(2. I dont have anything saved because im a single mom and what i do have saved is for my daughter from her great grandma and im NOT touching it)
The vested amount you have ($2688.67) does not include your loan balance so the cashout amount will not be affected. If you don't payoff the loan balance prior to you termination or within a prescribed period of time granted by your employer, the balance will default and you will owe ordinary fed/state income taxes on the loan amount and be assessed an additional 10% penalty if you are less than 59.5 years old.
As for how much you will get, it would look something like this:
$2,688.68
- 20% Mandatory Fed Tax Withholding = $537.73
- applicable state tax (this is state specific - some are mandatory, some are not)
Net Check: $2,150.95 (potentially less if state taxes are withheld - you can factor an additional 6% subtraction which would give you a general idea = $2,021.89)
Important: You may net out $2,000 - $2,150 but remember that you will still owe an additional 10% penalty when you file your income taxes (if you're less than 59.5 yrs old). If your tax bracket is higher than 20% you will also owe the difference.
Account for this: You will have an $80 penalty and Fed tax of $160+ owed on the loan default plus a $268 penalty (10% of $2,688) on the vested 401k balance = total of $508 in penalties and additional taxes. So budget for that as well.
Sorry about your job situation. You could rollover your 401K into an IRA or another 401K with a new employer ... and save the 10-percent penalty and taxes. The $800 loan will be due when your employment ceases, whether you rollover your 401K or not.
If your statement is showing "Vested Amount - $2688.67, that is how much is 'yours' or what you will get, less 10-percent penalty ($269), less $800 outstanding loan, less 20-percent federal withholding tax ($539), less state tax ($?) ... for a total deduction of $1609 + state tax; or a net to you of about $1000-1080 (if my head-math is correct).
Not to confuse you but "vested amount" typically excludes the loan balance. "Total Account Balance" will include the loan. Based on what you indicated my understanding is this:
Back in the day when we had 401K's, under a certain amount (if memory serves, it was under 3K it was automatically cashed out. Is that not done anymore?
i don't want to be judgmental, but maybe you could seek advice on how to avoid needing to cash out? it's an expensive decision, so it should be avoided at all costs.
so I may or may not be losing my job soon. Long story. I have some questions about my 401k. I wont be 100% vested until 3 years of employment (Novemeber of this year)
I know its not the "smart" thing to do but if I lose my job im going to have to cash my 401k out.
I have a loan with $800 left to be paid. What happens with that? Will it just be taken out before I cash it out?
Also the vested amount that I do have, ($2688.67) how much do I actually get?
(1. I have already started applying elsewhere)
(2. I dont have anything saved because im a single mom and what i do have saved is for my daughter from her great grandma and im NOT touching it)
Most people would advise placing your retirement money at a higher priority than savings.
In your case (not knowing much else) it might be more prudent to touch the daughter's money first.
Most people would advise placing your retirement money at a higher priority than savings.
In your case (not knowing much else) it might be more prudent to touch the daughter's money first.
I agree, especially if the savings is simply sitting in an account gaining minimal interest. Hopefully it's invested well.
Still, i've always felt a great gift to give a child is to not burden them with the expense of taking care of a parent who failed to save anything for retirement. I understand that being a single parent is tough, but when the child is older, they won't miss that one extra toy that wasn't bought for them in lieu of a deposit into an IRA or 401K.
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