• FreeAdvice has a new Terms of Service and Privacy Policy, effective May 25, 2018.
    By continuing to use this site, you are consenting to our Terms of Service and use of cookies.

Stocks and 401K

Accident - Bankruptcy - Criminal Law / DUI - Business - Consumer - Employment - Family - Immigration - Real Estate - Tax - Traffic - Wills   Please click a topic or scroll down for more.

What is the name of your state? North Carolina, can anyone tell me what the penalty is for taking my 401k and using the money to pay bills?

Also, are there any rules when cashing in stocks from an ESPP? What are the taxes on cashing in stocks?

Thanks
 


ablessin

Member
I was told that you can not take the monies to pay bills.

I was told that money can only be taken for a short list of strict reasons:
1. purchase of primary residence
2. Education expenses
3. Medical expenses. I will include an e-mail I got from HR for your review:
****************************************************
When anyone leaves the University, they are entitled to be paid for any vacation or sick time already accrued. Since you are a Med Center employee, "sick time" is calculated under PTO. You currently have 130.94 hours in your vacation bank, and 40 hours in your PTO bank. They would all be paid out at your current rate the pay period after you separate. Although you have time in your Supplemental Sick bank, that is not a bank that is a pay out when you separate: it is only accessible as a supplement to a disability. You should also take into consideration that payouts of this nature are taxed at the highest rate (42.5%). This is an IRS rule, not ours, but I hate to see employees get a check that is substantially less than expected because Uncle Sam has his hand in your pocket. It evens out at the end of the year because you're ultimate tax obligation is determined by total income for the year, but they whack you up front.

Your reference to Fidelity indicates you are considering tapping your retirement account for your business start up, and the rules for accessing that are pretty strict. It can be done for only the most serious situations (medical care, potential loss of a house, stuff like that). You would need to submit a written request to TIAA/CREF and they would consider it. The best person to check with on retirement accounts in HR is xxxxxxat xxx-xxxx. She will be able to tell you what the process is if you absolutely must tap your retirement.

On a personal note, I would strongly urge you to leave that alone. I made that mistake a couple times early on (when I was about your age, as a matter of fact!), because I thought retirement was for old people. Well, it comes around quicker than you think, and its tough as hell to catch up. Money you put into a retirement account will roughly double every 7 or 8 years, so a little bit of money invested when you're young grows like crazy once you turn it over 3 or 4 times. That same money invested later in the program will only turn over once or twice before you retire, and it makes for pretty slim pickings. If you are able to tap your retirement, it is really a high risk/high gain proposition. If your business takes off, you look like a genius! But if not, your really behind the 8 ball. I would suggest doing your homework with an accountant or lawyer before you fully commit to a business venture. Good luck either way.
******************************
So, there you have it... I highly doubt your HR will allow you to withdraw just for being in a financial bind -- other wise I would have a long time ago and I'd be debt free!!
Good luck to you
 

ablessin

Member
Also, I forgot something

Also, I failed to mention, that even when you can tap into your 401K, you can only access money YOU put in - -my employer matches my deposits, but you don't get those monies - here is another e-mail clipping (they go from bottom up)________________________________________

*****************************************
I can give you the numbers for T.Rowe Price (800-492-7670) and Fidelity (800-343-0860) to inquire about the value of your account. Voluntary contributions is the monies you have put in the account. You do not have access to the money the University has contributed on your behalf until you leave the University, or turn 701/2 while you are still employed or retire. You can increase the dollar amount that is deducted from you pay before tax by calling 800-410-4697 or changing the dollar amount on-line.


************************************

I have 2 accounts, the Fidelity and TRowe price - so do I still call TIAA for the application?

Thanks for your time
_______________________________________________________

Yes, you can withdraw monies to buy a house. You must have voluntary contributions if you have TIAA the number is 800-842-2776. Once you have established that you have voluntary monies, A letter is required indicating the dollar amount and the reason you need the monies. The letter should be addressed to the manager of this office which is XXXXXXXXXXx Who accompanied with the application and sent to my attention or we can arrange to have them dropped off in this office. Please let me know if you have any additional questions.
 

Snipes5

Senior Member
I am not sure WHERE they get that 42.5% figure for tax on amounts taken out of a 401K.

They are trying to scare you.

They will tax you in whatever your tax bracket happens to be, PLUS a 10% penalty.

Taking money out of there to pay bills is stupid.

However, it is even less intelligent to sock your money away in vehicles such as a 401K or ESPP if you don't intend to LEAVE IT THERE.

If you think you will need the money within the next 10 years, put it in a Roth IRA. If you think you will need it in the next 5, put it somewhere, but not in a 401K.

Note that as far as the IRS is concerned, you CAN take the money whenever you like, they will just tax you to death.

The administrators/owners of the plan have a vested interest in you NOT taking the money out at all, which is why their "information" is worded that way. Think Enron.

Snipes
 
This 401K and Stock Shares are from my former employer, I am no longer employed at the company. I had the option to leave the 401k where it was at because it was over $5,000.00 and that is what I chose to do. I didn't intend to put the money into the 401k and Espp and then not leave it, things have just gotten tough and I was just looking for a way out. Not to mention that my 401K has lost $400.00 since February.

Thanks for all the advice!
 

davidlanderson

Junior Member
Tough financial situations would be even more reason to leave your money in the 401k as it is protected in the case you do have to declare bankruptcy. Also I wouldn't worry too much about short term fluxuations in your 401k.
 

Find the Right Lawyer for Your Legal Issue!

Fast, Free, and Confidential
data-ad-format="auto">
Top