2008-10-03 
 

ant vs. grasshopper

I've lost 30 thousand dollars over the past year from my 401K thanks to this country's economy going to hell in a hand basket.

I'm having visions of history repeating itself. Back in the 90s I had 14 thousand in a 401K from my former company that I could not roll over. By 2001, it had dropped to 4K which was too small an amount for the big bad bank to deal with so they cut me a check...no penalties. I did still owe taxes on it, but it has occurred to me that if I'd just taken the full amount out when I first left my old job, I would've had enough to put down on that 1 bedroom apartment I was tempted by back in 1999. A one bedroom that is now worth, even in this market, at least 40% more than I would've paid for it back then. At the time though, I thought it better to save it for retirement and pushed aside the dream of my own place...and then watched the money evaporate like water from a hot skillet.

So combine that history with the current drastic drop in my nest egg, and I'm really wondering what to do. I know that there's at least a 10% penalty for early withdrawal and that any amount drawn out would count towards my yearly income.

That said, my yearly income so far has been rather below the poverty level for this state and I'm not sure just how much tax I would end up paying on a withdrawn amount...if any. Do I suck up the 10% and withdraw some of my hard earned cash to pay off the credit card debt? As it is I'm paying about $125 a month towards the big one. (yes, we spent a LOT of money crossing the country)

Say I took out 16 thousand to pay off the debt. I'd give back $1600 as a penalty, but I'd save myself $1500 in payments to that card for the next calendar year...not to mention eliminating the finance charges. Sure, I'm smart enough and have good enough credit to keep them low, but they still eat up money that I don't have. In fact that one bill is taking away all the earnings that I've made during those days I actually do get temp work.

Other than taking away some funding from my future retirement, which my inner ant preaches against, it seems to make sense. My inner grasshopper is aching to dance again. What would Suze do?

Labels: dose of mikey

* posted by me at 5:01 PM

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