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Withdrawing from 401k plan early

By Terry Savage on January 08, 2022 | Credit/Debt

Hi Terry, I have an old 401k plan for my previous job. I’m 55 still currently employed. I have a new 401k plan with my new job. I am now having financial difficulties, credit card debt falling behind on mortgage student loans Etc. As a last resort ,I’m considering withdrawing some money from my old 401K plan. I would rather do that then file bankruptcy. Your thoughts? Thanks, Brent

Terry Says

This is a bad option — because even though you do not work there, you are under age 59-1/2 and thus will pay a 10% penalty in addition to ordinary income taxes. Instead, I suggestyou call 800-388-2227, which will connect you to the nearest local office of the National Foundation for Credit Counseling. They will help you look at the alternatives –including bankruptcy — and give you good advice you can trust. And remember, bankruptcy doesn’t wipe out student loans!

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