Time is running out. We must prepare for the worst. I may cash out my 401k.

[shockey80]

I don't want to, however I may have to because I believe the worst is yet to come and it's going to be long term. My 401k, if I started to collect monthly payments it would help a little, but not enough. I don't have a large 401k.

If I cash it out I could live off it for a few years, enough to allow my wife and I to stay at home till there is vaccine. A change of leadership. There is no way in hell I am going back to work. My wife and I are both over 60. Not eligible for SS yet. Tough decisions to make in the next few months, for all of us.

[BannonsLiver]

1. Panic is not the way to go IMO

[brewens]

3. George Steinbrenner once said, "never sit around discussing things rationally when the situation

calls for panic!"

[BannonsLiver]

5. I think George Costanza said that as well.

[brewens]

12. I don't think it's a real quote and Seinfeld may be where I got that actually. It's just funny to

pretend to quote "The Big Stein" seriously.

[shockey80]

8. That's not panic, that's survival.

[BannonsLiver]

11. Yeah

I guess we all handle stressful situations differently. This virus has illustrated that clearly.

Good luck living off social security when your retirement funds are exhausted. That’s not going to be pretty, either.

[hamsterjill]

2. I'm in the same boat

But unemployed. I don’t think workers between 60 and 65 will even be considered for the much fewer jobs that are going to be available. It was hard enough before for older workers to get hired. But now...

I have considered the cashing out but the tax hit would be rough.

[LakeArenal]

20. Exactly what happened to us in 2009.

For three years after I lost my job and UC dried up, we struggled until I took early SS at 62. We lost about 75% of our retirement, including the $500 a month I lost by taking SS early.

Now I hear Dump suggests folks take early retirement now for decreased payments later.

Repukes just hate us older folks.

It really is true. Though, not sure if they hate everyone as well. All signs point to, they hate all of us.

[leftieNanner]

22. You can sell the stocks and bonds in your 401K and leave it in there as cash

There is only a tax hit if you take the money out. And if you do that gradually, then it's not too bad.

[Mike 03]

4. I'm worried but trying not to do anything drastic.

This is a marathon. A good financial advisor is a valuable thing in a time like this. There are things we can control, like our provisions, and a lot that we can't.

[JenniferJuniper]

6. Don't. If you are afraid of the market,

and you should be, think about moving the money to the most conservative option your plan has and then plan on moving it back into the market later. In a slow and measured fashion.

[Johnny2X2X]

7. Do not cash out!

Move to bond funds, collect unemployment while you can.

At 60 you should have already start to de-risk.

[DrToast]

10. It's not about risk. They need the money

Moving it into bond funds won't help.

[shockey80]

17. I have not made a final decision yet.

I may start to collect monthly payments from my 401k. I am eligible to do this without penalty. However, I am expecting the worse and if I see the economy start to collapse, a second wave hit, I will take drastic measures in order to survive.

[mobeau69]

9. Surely your plan has a low risk/reward "cash" fund.

Put it there. Taxes plus 10% penalty will yield you little.

[DrToast]

15. He's over 60. There isn't a 10% penalty

And moving it into a cash fund won't pay his bills.

[roamer65]

16. If you are 55 or over and quit or lose your job for any reason, the 10 pct penalty is waived.

It’s also waived for COVID hardship now as well.

[JenniferJuniper]

21. Thanks. So few know about the Rule of 55,

it's almost like its a secret.

[roamer65]

24. Since my odometer rolled the "double nickel", I see my 401k as a big UI fund.

[JenniferJuniper]

39. I deliberately left my 401k with

the employer I left at 55.

While I hated to do it, I had to pull out money earlier this year for an emergency septic situation. I'm glad there was at least no 10% penalty.

I'll roll it all into an IRA when I get close to 59 1/2. Better options for investing.

[roamer65]

40. Makes sense.

[shockey80]

18. You get it.

[Totally Tunsie]

25. The 10% penalty will be waived but they'd still have a tax liability.

Those funds will be considered as income for that tax year and will be taxed as such, rather than being spread out over many years.

[Yavin4]

13. When people start abruptly withdrawing their 401Ks, the markets will tank. n/t

[roamer65]

14. Mine limits withdrawals.

I cannot get the lump sum all at once, so I’m just gonna sit tight. I’m in money market funds right now, so the only way I lose is a currency failure.

I’m waiting for another big dip in the stock market. I made a decent amount off from the last one just recently.

[marlakay]

19. Hope my mistake helps you

I rolled my 401k into a IRA during the bad part of 2007. I got scared because we had just retired a few years before and my hubby lost his retirement job. I panicked.

Now many years later I look at how much stocks went up after that. We ended up having to change our 15 yr mortgage for a 30 yr one then 5 yrs ago sold house when it was too much. That was our dream house we had built and lost money selling it.

We are ok now living in a smaller older house different area with small mortgage, but if I had hung on we would have been ok.

Its hard to see 5 yrs down the road when your in pain now.

So really think about it.

[shockey80]

27. I hear you, my response is this.

We are facing something that will make the 2008 economic collapse look like a church picnic. A 1918 type pandemic, with the biggest economic collapse since the great depression. Thinking like Spock, logically, at a time like this may not work. This is a time to think like Captain Kirk, outside the box. All normal bets are off. Drastic measures may be the wise way to go.

[Fiendish Thingy]

29. Even Kirk sought Spock's advice when things got tough

This economy could be worse in terms of unemployment, but the banking system is not near the total collapse it was in 2008.

You should talk to your financial advisor.

[Totally Tunsie]

23. Are you prepared and will you be able to live on Social Security

once your 401(k) funds run out? Expenses in the future will be higher.

Are you OK with taking a big tax hit for your one-time withdrawal? It will be counted as income and taxed as such for the year of withdrawal.

If you truly believe as you say "the worst is yet to come and it's going to be long term", are you ready to face that with no back-up funds in a 401(k)?

Remember too, that you and your wife are probably healthier and more able to work now than you will be in future years. It won't be as easy later to supplement your Social Security if you're not well in future years.

Please don't act in panic. Good luck with your decision(s).

[captain queeg]

26. The other side of the equation is downsizing and reducing expenses

Maybe you’ve already done whatever you can in that respect. I hadn’t planned on retiring when I did, but medical issues forced my hand. I think that’s the case for many. But I’d gotten into living fairly cheaply and it’s been ok. I quit working at 61 and had to hold on till 62 to get SS. I know young people worry about never getting SS but the way it’s going I’m not so sure those of us who already get it can be assured it’ll be there. Anyway, I’ve been taking money out of my 401 and so far SS has covered my fixed expenses. I don’t want to drain the 401 entirely, it’s my only rainy day sort of backup.

[shockey80]

30. Your situation is something like mine.

I don't want to cash out. I want to have that monthly payment to supplement my SS when I get it. However, to say these are crazy times is a major understatement. Staying alive is more important than future economic health.

[Fiendish Thingy]

28. My 401k is doing much better than the S&P

I have a great team of financial advisers, and we are only down about 4% for the year to date.

S&P is down 10.65% YTD (it was down 40%)

The market will remain volatile for the next 3-6 mos for sure, until after the election.

Cashing out your 401k now will realize losses that are currently only “paper” losses.

If you have a diversified, balanced portfolio (at your age, your advisor should recommend a moderate conservative portfolio - about 60/40 bonds/equities). Our portfolio has weathered the 87 crash, dot com bust and 2008 GFC, and I was able to retire last year at 62.

If you are over 62, you can start SS, and let your 401k recover for a few years.

[ProfessorGAC]

35. I Almost Completely Agree

But, the S&P is down 16+% from it's 2020 high.
This makes sense as it was overvalued by 12-16% at the high.
The rest of what you wrote is very sound advice.
However, this person needs money now. If this person was strictly talking about retirement fund protection, I'd be with you all the way.
I moved EVERYTHING into AAAAA rated lifetime income accounts 10 days after I retired.
I put 60, 25, & 15% into the three, prioritized by lowest lump withdrawal period & penalty, best return, & best principal protection. But, all three have a zero floor, meaning the financial firms are taking all the loss risk.
I had well into 7 figures to work with so security was more critical than the exact monthly payout.
Fortunately, I had time to shop, unless folks now!

[Mike 03]

37. I was scared to even look at my last three statements, but when

I finally worked up the nerve to look it wasn't all that bad. Like you, it was down around 4%.

It was starting to look like the market had formed a bottom, but the way this administration is forcing reopening, I'm worried it could get worse.

[Maxheader]

31. Transfer it into a fidelity acct..

Let the pros set it up...Then you can withdraw gradually while the balance, hopefully,

gains...

[Bluesaph]

32. Rent in Costa Rica is $450/month

For a one bedroom apartment. Your Medicare works down there and they handled the covid situation well.

Life isn’t perfect there. But it’s an option.

[shockey80]

33. Good advice from everyone, thank you.

I have a few months left before I make my final decision. By fall we will all know how bad this is this going to get. Unpredictable future events could force us to make tough decisions that we could never dream happening.

[LexVegas]

34. I take some comfort in the fact that the vast majority of your predictions are completely wrong. nt

[shockey80]

36. Enjoy your comfort.

[world wide wally]

38. Have you asked what you have been saving this money for?

Maybe a time like this?

[shockey80]

41. Exactly.

[nitpicker]

42. Beware estimated tax payments as well as taxes!

If it's NOT a Roth 401K, it gets added to your taxable income.

If a total withdrawal would boost (more than just a little bit) total taxable income for this year over last year's, you have to pay extra tax.

AND if you don't around and immediately send that extra tax to the IRS by the payment deadline set depending on when you withdraw the money, or make arrangements to pay the extra tax throughout the year, PENALTIES for not making estimated tax payments on time WILL APPLY.

I am not a tax specialist; please consult a professional if you are THINKING about "cashing out".

[nitpicker]

43. Read IRS Publication 505 for more information on estimated taxes

https://www.irs.gov/site-index-search?search=estimated+income+tax+&field_pup_historical_1=1&field_pup_historical=1