Saturday, January 7, 2012

Opinions please

I got a letter this week from my former employer that I had my 401K with them and have 60 days to do something with it. I was told I will lose the funds that my employer contributed, but I will get everything I put in with the exception of 20% to withhold for tax purposes. Since I only contributed for 6 months, I will only get about $515.00 back (I know, sad). So here's the dilemma: do I cash it out and pay off a credit card and a small loan OR put it in an emergency fund OR do I take it and start a Roth IRA?

What would y'all do?


  1. I see you have a small amount in your EF, but I can't tell how much. I'd put 1/2 into the EF, 1/2 on debt!

  2. You should have the option to roll it directly to an IRA - and do it in such a way as to avoid any loss of money. Search roll over 401k on

    If you decide to take the money - they may withhold 20% - but you will owe the IRS 10% penalty plus pay tax on the money as income in 2012. So 20% may be enough or you may still have to pay MORE to the IRS in 2013 when you do the 2012 taxes.

    I strongly recommend rolling the full amount into an IRA - it isn't much - but it is something for your future.

  3. Roll to a Roth, once Credit card debt is paid off start contributing to this regularly. Just the fact that you have it will mean something.

  4. I would roll it into a Roth. You shouldn't have to pay taxes on it if you roll it into a qualified program.