I have about 43k in a 401k from my old job. I have considered cashing it out to ease my debt and improve my credit. I know that it is not generally reccomended but I have 15k on one card at 23% APR. I owe another 10k in misc cards and auto loans at around 5% APR. I am also considering moving to Las Vegas and would like to buy a house for around $250k-275k in the near future(with roomates down the road, as I am single). I would have liked to have moved sooner but decided to get a colonoscopy done(2 months from now) prior to the move due to me having insurance with my current job and my family's colon cancer history. When the move is done I will be without a job and insurance for a short period of time.

I was also looking at maybe transfereing the funds to some sort of IRA @ ING Direct or another Bank to maybe cut down on the penalty for early withdrawl.

What do you think I should do?

Well, I'm not one for early withdrawl from an IRA

BUT, it sounds like you have lots of debt

I'd take it out - use ONLY what you have to - and reinvest the rest.

ETA: Oh, and BTW, I generally don't recommend getting an IRA through a BANK.

To answer your question, my 401k from a previous job is still there. In a Fidelity fund, earning interest like it is supposed to. As for your debt, hard for me to advise....I try not to buy things I cannot afford. I carry no balances. You need to pay down that debt. If that means not buying a house, well, that goes back to buying things you cannot afford.

Just my 2 cents. since you asked.

jj

23% interest???  Yikes... your debt will double in about 3 years if you only paid the minimums and kept using the card.
You COULD get a installment loan for that debt which would turn it into a fixed debt as opposed to Revolving.  

An example of Fixed Debt vrs Revolving...
----------------------Revolving----Fixed
Amount borrowed--$15,000.....$15,000
Interest Rate (APR)-...15%.......15%
Monthly Payment-....$525.00...$525.00
Years to payoff-......15-years...3-years
Interest paid-.........$8,200......$3,700
Total cost-............$23,200....$18,700

Just  remember that you wil pay both ioncome tax AND 10% of the amount not rolled over as a penalty.
It takes a big bite.

DO NOT DO NOT DO NOT cash out the 401(k).  Leave it alone, or roll it over to an IRA if you want more control.   You can not make up for lost time in the future.

If you are in debt, sell your shit.  Sell your guns, sell your audiophile gear, sell your new car, whatever you have that you don't need to live.  Sell the plasma TV.  (Read books they're better for you he
The only way I would drain the 401(k) to pay off debt would be if I was looking at bankruptcy.

Quoted: You need a total money makeover of the heart. www.daveramsey.com/

www.daveramsey.com/etc/askdave/?intContentId=6350

Just the begining of the info on this site. Thanks

One word.....rollover. If you take it out, you will pay taxes and penalties on it. Don't even take possession of it in the form of a check made out to you. Roll it over into an IRA and make them direct transfer it. Vanguard Investments has some good mutual funds you can invest in with very low expense ratios.

At your next job, you might want to put in enough to max out on the company match then use the rest to pay off your debt. Get your debt down to where it is manageable then work on your company savings.

Quoted: Quoted: You need a total money makeover of the heart. www.daveramsey.com/ www.daveramsey.com/etc/askdave/?intContentId=6350 Just the begining of the info on this site. Thanks

1)
you can't afford the taxes on rolling your 401K over into a Roth IRA, so the only thing you can really do is roll it over into a traditional IRA.  that said, i think you should forget about this money for now -- whether it is in your prior employer's 401K or in a Traditional IRA account, it is tax-advantaged and you are going to take a ~35% hit on it if you take it out.  

2)
you can't afford to buy a house right now.  you have at least $25K in high interest debt.  the current 23% rate on your $15K is staggeringly high and indicates (to me at least) that you have missed payments and are probably in a "universal default" situation where the interest rates on your other cards are getting ramped up as well.  this is not a good start to getting a mortgage at an attractive rate.  

3)
i would not buy a house with friends.  that would be a mistake.  unless i misread your post and you were looking to rent some rooms in your house to some friends.  that would be a much better situation.  

4)
you need a debt consolidation service and you need some credit counseling.  again, that 23% CC rate is a large red flag to this whole conversation.  you need to kill off that anchor as quickly as possible.  i know you like your rifles/cars/etc but that debt will be your undoing.  there is no easy way to say this, but... you need to pull your head out of your ass here.  half of me is thinking, "just have him pull the money from his 401K and pay off all the debt", that would be the quick, expedient way out of this mess. but the other half is thinking "if he has a decent job, can sell off some unneeded gear, and can cut some monthly costs, he can kill off that $15K debt in 6 months and keep his 401K/IRA intact".  i'm hoping for the latter otherwise you will have borked up a pretty good retirement investment pool.  

summary: forget about the 401K money for a minute.  how do you plan to dissolve the high interest rate $15K debt as quickly as possible?  you lose ARFCOM points if your solution includes the 401K money.  

ar-jedi

The reason My APR is so high on the one card is that my mail(payment) was stolen while on a promo apr agreement with the pirates at Citibank. The others are locked in on promo apr that I pay automaticaly electronicly every month. I wont let that happen again.

When I called Citibank a while back to report what had happened they kept repeating that breaking the policy is breaking the agreement/policy, which is fuckin BS if you ask me. I refuse to charge on the other cards in order to preserve the low APR for the entire balance on them. I make about 35k a year BTW and plan on losing major ARFCOM points cuz I cant "get both" anymore. I really wanna get that high APR card paid off ASAP. If I can do that the other things will be no problem provided I adjust my spending.

I am going to start looking into different IRAs(not roth). Any suggestions aside from Vanguard Investments?

Dude, listen to ar-jedi. Please.

DO NOT cash out your 401k to pay off some stupid credit cards. Damn.

First some basic math: If you take the money out you will not be starting from $43k. It's going to be more like $32k from early withdrawal penalty and 15% tax.

So then subtract $15k (high APR card) and you're down to $17k. Then subtract $10k to bail out of debt and you're left with a measly $7000 to start funding your retirement.  

And seriously you can't afford to buy a house anytime soon. Certainly not something in the $250-275 bracket on $35k/year. Good Lord you think it's bad now wait until you get the mortgage payment. Yikes!

Just rent for a couple of years until you get this shit straightened out. The rest will take care of itself.

Get the new job, STOP contributing new funds to the 401k and get very aggressive in paying down the debt (use the money that would have been into your 401k + more for debt reduction). Sooner or later the low-rate cards will send you some balance transfer checks at an introductory rate. You can then use them and consolidate on a lower interest card.

Frankly the 23% APR isn't the problem..... the lost/late payments aren't the problem..... the fact that you've accumulated $25,000 in unsecured debt is the problem.

The first thing you need to do is adjust your spending habits. RFN.

If you don't do that then nothing else you do will really matter.


If I were you, 'yeah' I'd probably go ahead and do a ROLLOVER into an IRA with Vanguard. DO NOT allow your old employer to cut a check to yourself or otherwise touch it or you'll incur tax penalties. Contact Vanguard or Fidelity they'll walk you through it. Roll it into an IRA with whatever investment options your new broker recommends (it really doesn't matter at this point). Or you can just leave it alone, if it's done well I probably wouldn't mess with it right now.

This is YOUR retirement money, pay yourself first man. This will be a good learning experience if you let it be.

You've got a few thousand dollars worth of guns in your sigline, if you really want to get out of debt consider selling a few of them off. What else can you sell? Crap in your closet may bring a few hundred (or more) on ebay.

Good luck.

What I did, and remember this is just my own personal experience, will probably cost me some ARFCOM points. In 2001 I quit my job specifically to cash in my retirement account and 401K. Then took all the proceeds and paid off my house and all debts I had. With the left overs I started my own business and opened a Roth IRA. This was the best move I ever made as now I am able to work part time for myself and so is my wife. We have no stress when it comes to making payments because we have no debt. Freedom is a great feeling!!
Since we live well below our means we are able to take a lot of what we make and plow it back into investments. I wouldn't have it any other way.

If cashing out and getting debt free is what will give you peace of mind then by all means do it. But you had better be disciplined enough to see the error of your previous spendaholic ways and not go there again. This is just what I did and I'm glad I did it. It certainly wouldn't be the decision most would or should make especially if they lack the discipline to stay out of debt.

Are there IRAs that are FDIC insured? I was on the Vangaurd and ING site looking at their IRAs and they are not insured. I then went to the FDIC site and they mention that there are IRAs that they insure, I just cant seem to find any at a good institution.

Quoted: Are there IRAs that are FDIC insured? I was on the Vangaurd and ING site looking at their IRAs and they are not insured. I then went to the FDIC site and they mention that there are IRAs that they insure, I just cant seem to find any at a good institution.

a Roth IRA is a type of investment account.  it is a tax-advantaged "wrapper" around investments you select.
a Traditional IRA is a type of investment account.  it is a tax-advantaged "wrapper" around investments you select.
a 401K is a type of investment account.  it is a tax-advantaged "wrapper" around investments you select.

the FDIC does not "insure" these types of accounts (that is, the wrappers).

the FDIC insures several kinds of investments that go into certain types of accounts.  for example, if you have a passbook savings account at a local bank, the FDIC will insure you against loss (due to the bank failing or being robbed) up to $100K or thereabouts.    however, you are at the very low end of the risk vs reward spectrum.  this safety net insures that the bank will never deprive you of your money -- but you are losing money another way.  the interest rate paid by a local bank is abysmal -- on the order of 1%.  if inflation is 3% or so per year, you are losing money by keeping your savings at a local bank. in other words, although at the end of a year you received 1% interest, 3% of your purchasing power was eroded.  so in effect, you can buy less after a year than when you started the year.  that's not smart investing.  

a little higher up on the risk scale are government treasury bills (short term) and bonds (longer term).  if you believe that the US Govt will not fail in the coming months or years, you can get 4-6% from T-bills and bonds.  companies such as Fidelity, Vanguard, and ING "pool" or "ladder" these types of investments into what are called Money Market Accounts (MMA).  this is basically a savings account that pays a lot more interest than your local bank -- right now your typical MMA is at 5%.  no, a MMA is not FDIC insured.  however, no MMA has ever defaulted and it would take a major US Govt calamity to cause MMA's to slip.  hence, a MMA is one of the best ways to hold cash as an investment and stay ahead of inflation.  most MMA's allow check writing and the like, so in effect a MMA works just like your bank.  the ING MMA is very popular.  

within a Roth IRA, Traditional IRA, or 401K, you can hold MMF's -- money market funds. they are constructed exactly as described above, however, you buy shares of them inside your investment accounts.  the NAV (net asset value) is a constant $1.00 -- but at the end of every month you get a dividend payment which will increase your account amount.  in essence, a MMF is cash -- as close to cash as you can get and still be getting interest.  another possible cash-like investment is called TIPS, or Treasury Inflation-Protected Securities.  these are US Govt issued treasury bonds with built-in inflation protection tied to the consumer price index (CPI).

ps:
higher up the risk ladder are corporate bonds, mortgage bonds, high yield (junk) bonds, stocks, options, futures, and so on.  all of these trade risk for potential reward in a humongous zero-sum game with other investors.  you decide how much risk you can accept, and you receive either the rewards or the losses.  

ar-jedi

Thanks for all the good info guys!

My spending has gotten out of control and I WILL keep it in check, BTW.

jdmpimp..
What I demostrated in my first post is what is called the G.O.O.D loan.  Stands for Get Out Of Debt.  I believe it is through citibank.  You must have a credit rating above 550.

If you have a Brokerage account to trade stocks on, open the IRA with them.  If you dont, open the account and an IRA at the same time.  I know that Wells Fargo has a full service brokerage side and it gives you some decent perks on your personal accounts if you want to go that route too.

I'm series 6 and 63 licensed because of a previous job and honestly, its not something I enjoyed playing with that much.  Its better left to a full blown Financial Advisor or just plug it into a few Mutuals on your own research.  

Quoted: My spending has gotten out of control and I WILL keep it in check, BTW.

Quoted: how do you plan to dissolve the high interest rate $15K debt as quickly as possible?

so, what's the plan?

write it down for us.  write it down for YOU.

ar-jedi

Quoted: Quoted: My spending has gotten out of control and I WILL keep it in check, BTW. Quoted: how do you plan to dissolve the high interest rate $15K debt as quickly as possible? so, what's the plan? write it down for us.  write it down for YOU. ar-jedi

I will be looking into debt con BUT in the meantime I plan to pick up the camera and sell ALOT in the EE here on ARFCOM to jump start the reduction. I plan to put all of what I make there and on ebay into the debt reduction. From there I am going to spend $750 a month on credit cards alone, paying the minimum on the low APR cards and pay the remainder towards that damn 23% card.

I was thinking of actually paying off my car ($2500 @ only 3.9%) so I can have that extra $300 a month for the high interest card even sooner. But will stick to the game plan above til I find a good Debt Con program. Any good ones that you guys recommend?

I created a realistic budget that I can stick with. No more "get both" for me . Thanks again guys for helping me pull my head out of my ass.

Roll it over into an E-trade account or similar.

Quoted: If I were you, 'yeah' I'd probably go ahead and do a ROLLOVER into an IRA with Vanguard. DO NOT allow your old employer to cut a check to yourself or otherwise touch it or you'll incur tax penalties. Contact Vanguard or Fidelity they'll walk you through it. Roll it into an IRA with whatever investment options your new broker recommends (it really doesn't matter at this point). Or you can just leave it alone, if it's done well I probably wouldn't mess with it right now. Good luck.

I am sure I want to roll it over into an Vangaurd IRA:
https://flagship.vanguard.com/VGApp/hnw/accounttypes/retirement/ATSRollOverPlanContent.jsp

I am, however, unsure which one I want to open. I have been starting to do alot of research on funds and what to look for but am not sure if I want to limit myself to Vangaurd Funds or choose their brokerage account. Thoughts?

BTW - I have an appointment to get an old engagement ring appraised so I can get top dollar for it. I paid 2600 for it back in 2000 and have seen nearly identical rings going for about 4000 lately. This should really jumpstart my debt reduction. Just trying to stay excited about it since I cant buy shit

Quoted: I am sure I want to roll it over into an Vangaurd IRA: https://flagship.vanguard.com/VGApp/hnw/accounttypes/retirement/ATSRollOverPlanContent.jsp I am, however, unsure which one I want to open. I have been starting to do alot of research on funds and what to look for but am not sure if I want to limit myself to Vangaurd Funds or choose their brokerage account. Thoughts?

I do not work with Vanguard.  I do have my IRA with them and found them very helpful with the rollover process from my previous employers' 401k plans.  I didn't worry about getting a brokerage account since there's enough offerings in their mutual funds to keep me happy (for now anyway, ask me again after I make my second million :-)).

Many folks just put their money into one of the "life-cycle" funds so that they don't have to take the time to do a lot of research into different funds, or worry about rebalancing every year.  The only downside I've read about these funds is that most of the brokerage houses tend to be a little too conservative with them.  So, you may elect to put about $30k into a life-cycle fund, and the remainder into something more aggressive that isn't already held by the life-cycle fund (e.g. a different overseas fund, or small-cap index fund).

Some info on the ring - after my mother passed away my sister and I took her jewelry to be appraised so it could be divided "equally" (as we could) based on value.  The jeweler gave us two numbers: what she would purchase it for (if we were interested in selling, which we weren't since most of it was heirlooms), and what she would sell it for (our replacement cost for insurance purposes).  Let's just say that if I ever got sick of IT I know what business I'd go into next...