Why Americans Are CASHING OUT Out Their 401(k)s During This Economy

[00:00:00]Usually when you pull money out of your 401k, it's going to get taxed. Whether that is right now, if you're not retirement age, if you pull money out of your 401k, you're probably going to get hit with a tax bill and you're probably going to get hit with a 10% penalty tax because of the early withdrawal.

[00:00:15]>> So, y'all didn't know that y'all didn't have to wait until y'all was old and about to die to get your 401k?

[00:00:20]Baby, I'm like the commercial, it's my money and I need it now.

[00:00:24]>> You ain't got to worry about no credit check and none of that if you got bad credit. You trying to buy a new car? You ain't got the money in the bank? Borrow from your 401k. You need that down payment for a new house? Borrow from your 401k. Hell, if you just want to take a trip out of the country, borrow from your 401k. Or you can do like I'm going to do. Get my 401k and I'm going to take that money and start my own business.

[00:00:48]>> If I can give y'all one piece of advice is take money out of your 401k.

[00:00:54]We're not going to live to see 50. The world is already showing signs that the tribulation years are coming.

[00:01:03]And one thing that I'm going to do for certain is take money out of my 401k.

[00:01:09]Because life is too expensive right now to be trying to have a little piggy bank. If we do get to 50, we will cross that bridge when we get there. But right now, we're in the present and right now matters. Take your money out.

[00:01:24]>> So, right now we're seeing more and more people withdraw money from their 401k's.

[00:01:29]And this is going to be very controversial. Of course, it's not really going to be the best financial option for a lot of people, but for people who have no money and they have some money in their 401k's, a lot of people are using that money. They're cashing out their 401k's to pay off stuff such as debt or just pay rent for that month cuz cost of living right now is just extremely brutal for a lot of families. and you can use your 401k. It's not going to be the best option long-term, but if you need it to survive, it's definitely an option a lot of people are considering.

[00:02:06]And we're seeing it in this video. Tons of people are using their 401ks for some good financial moves, such as paying off debt or maybe buying a house. But if you can afford not to, try not to cash out your 401k because you are going to be paying some penalties by doing so. Let me know in the comments below what you think about this, and take a look at the rest of these clips.

[00:02:26]>> Let's do a little story time on how I cashed out my 401k at 25 years old. So, I worked at Walgreens from 2006 to 2014.

[00:02:35]The most I made in a year working there was maybe $22,000 a year. However, I did consistently contribute to my 401k during that time. But when I left in 2014, I left for an accounting internship. Now, one thing about going into public accounting after college, I actually signed my job offer in the fall of 2014 for the following October 2015.

[00:02:58]So, I knew way in advance that I was not going to start my full-time job until October 2015. So, I ended my internship in like May 2015 and wouldn't start my full-time job until October 2015. So, it really didn't make sense to try and find a job just for a few months.

[00:03:16]So, because I did not prepare and because my parents weren't super financially well off, I decided to cash out my 401k to live off of it during the summer. When I cashed it out, it was probably $12,000, but I did have to pay taxes and penalties on it. The only good thing that came of it was that I used that money to live off of, so I didn't have to work. And I actually knocked out two of my CPA exams and then took my third one shortly after I started work and my last one before the end of 2015. But I did run a calculator. If I left that $12,000 in there for 40 years until I was 65 years old at a 7% rate of return, it would have been $180,000 when I retire. So, that part kind of sucks. It is what it is. You live and you learn. Would I recommend cashing out your 401k? Absolutely not. At least I did use it to my advantage to be able to study for the CPA exam. Today I decided I'm going to be cashing out my entire retirement.

[00:04:23]I recently discovered, which I should have researched earlier, that my retirement is doing really well because 16% of my mutual funds are invested in BlackRock and it doesn't sit well with me.

[00:04:42]And I don't believe in this system anymore, anyway.

[00:04:48]If you don't know, I'm Sarah. I quit my corporate job back in January.

[00:04:52]I've been a nomad all summer. I'm DJing now on TikTok and started a creator network and trying to build an app that changes the way that we work entirely.

[00:05:05]And I'm sitting here at Santa Monica Beach looking at the ocean and realizing that my 50k in student and credit card debt just isn't worth it.

[00:05:22]It's not worth the stress to what? Have money sitting?

[00:05:28]So, I'm documenting this.

[00:05:31]Today I'll be calling my financial advisor.

[00:05:34]And I'm interested to know if anyone else has uh personally divested.

[00:05:41]Um I'll be looking to invest um differently in the future.

[00:05:51]Yeah, has anyone else done this? How can I expect organizations to divest if I myself have mutual funds that are doing well because of BlackRock, which is known to be harming communities. So, >> [sighs] >> yeah, I just felt called to share that and, um, if you're in my family and you're seeing this, it's going to be fine.

[00:06:15]>> I am absolutely buzzing because I just deposited my 401k.

[00:06:21]Yeah, yeah, yeah. I deposited my 401k cuz I took it all out so that I could pay off my credit cards because your girl was drowning.

[00:06:30]I was drowning in credit card debt because I had lost my job when I was traveling Europe. So, I had to put everything on my credit cards and I just like couldn't do it anymore. Literally crying to my friend. I was like, "What do I do? Like, do I like file bankruptcy? Like, do I take out like a personal loan? I just like don't want to pay anybody back. Like, I just That was like the whole goal is to just like be done with this. Like, I just don't know what to do." She's like, "Wait, you still have a 401k from Warner when we worked there cuz we worked at Warner together." And I was like, "Yeah, why?"

[00:06:58]And she's like, "Pull it out." She's like, "Take that [ __ ] out and pay it."

[00:07:00]She's like, "You know that you're going to get a job soon again and like you're just just aggressively put into your 401k then." And I was like, "You're brilliant." Cuz I'm like, "When I pay my credit cards off, I can just put it back into a 401k." Cuz I was paying like $1,300 a month in credit card debt.

[00:07:16]That's the minimum, mind you. So, I literally was not even making a goddamn dent with the 1,300. I was like, "I can't do this anymore. Like, literally can't do it. It's not worth it." Pulled out my 401k and I just deposited the check and I am I like literally feel like I can breathe. I just feel so happy because now I feel like I can like live my life and really not make money just to pay off debt that isn't even getting paid off because of the [ __ ] interest rate. This is just what I've done that feels good to me was to take out my 401k. It's an option. I feel like rich people do this all the time. So like why are we not talking about it more and I hate that people don't talk about debt enough um because everyone has it nowadays.

[00:08:00]Everyone.

[00:08:02]I just feel so excited.

[00:08:04]>> [laughter] >> Shout out to my friend who like told me about this because I didn't even think about it. Didn't even think about it.

[00:08:10]yay. When I quit my job I got the option to cash out my 401k. I didn't have that much money in there so I cashed it out cuz I'm going to use it to pay off some debt and then put in a high yield savings account. But I just told my dad like who is a Republican that I cashed out my 401k and he was like, "No, don't do that."

[00:08:28]And I was like, "Why? What future? What future am I saving for?"

[00:08:37]And before the finance dude bros come for me right now, I'm not a financial advisor. I did my research. I knew I had to pay taxes. I knew I would have a fee.

[00:08:46]Shut up. Unfollow me. Get me away from that algorithm.

[00:08:52]I don't care. I'm happy with my decision. We are all [ __ ] right now.

[00:09:00]We are so If you live in America, I live in America clearly by the state of like what is even happening. Um So yeah, don't come for me. It's fine.

[00:09:11]Don't I'm not giving financial advice so yell at me.

[00:09:13]Don't yell at me.

[00:09:14]>> Two things I know for sure.

[00:09:17]When income tax time come, I'm not getting no money back. All my kids are grown and gone.

[00:09:23]Another thing I know, I'm going to hit that 401k.

[00:09:26]I will. I will hit it. People say that's money for your retirement. Honey, I don't even know if I'mma be around for retirement. I'm not about to walk around broke now when I got plenty money in that 401k? Oh, it's mine. What that commercial say? It's mine and I want it.

[00:09:42]I'm going to get it.

[00:09:43]And sometime I may even get two in a year cuz I'm going to hit them for the loan and then get them for the hardship cuz the hardship you do not have to pay back.

[00:09:52]I'll be damned if I'm walking around broke and I got thousands and thousands in a 401k?

[00:09:58]No, ma'am. No, ma'am. That's what I worked for and that's what I put it in there for. Retirement, honey, I may not be here and then the way these stocks going, the money the money is busy declining.

[00:10:11]So, I'd rather get mine now and enjoy it.

[00:10:14]Cuz you may not be around. It may not even be a retirement.

[00:10:18]You know what I'm saying? So, I don't get an income tax, but I will hit that 401k up twice.

[00:10:24]>> Okay, question. So, have any of y'all ever withdrew y'all 401k and y'all was not of retirement age and not a partial 401k withdrawal, but a like you you left a job, you had a 401k be left behind and you decide to withdraw it in full.

[00:10:42]Um what was the tax penalty? And did you have cuz I know there's like a a 10% early withdrawal penalty, but did you owe taxes at the end of the year when it was time time to file your taxes? I'm only asking cuz my friend asked me um cuz she's thinking about withdrawing her 401k.

[00:11:03]And I mean, I've never done that before, so I I don't know. I'm like, let me just hop on TikTok to see if there's anybody who ever withdrew their 401k in full and y'all was not of retirement age. If you have not done that, this video is not for you. Don't hop in the comments and say, "Don't do it. Don't do it." I need somebody who actually did do it. And what was the results of that?

[00:11:24]>> Now, I totally understand why people are cashing out their 401ks. They want to enjoy life in the moment. They don't want to wait until they're 60 to be able to travel the world. They want to enjoy life right now because tomorrow is not guaranteed. You never know when something might happen. You might not be around for it.

[00:11:43]And people just want to live life in the moment. That's what they're realizing right now. Life is very brutal. Let's enjoy life while we still have the chance and while we're still physically able to. And we're seeing people go on vacations, cashing out their 401ks. Now, of course, there's some people who are making some good moves by using that 401k to pay off credit card debt. Having debt around is definitely not something you want. So, paying it off is going to be a, in my opinion, an okay move. But for people who want to live in the moment, cashing it out for vacation, that's a little bit controversial, but I totally understand why.

[00:12:18]>> So, I cashed out my 401k to buy my first home.

[00:12:22]And I know that was very stupid. Now I know that. But that happened about 5 to 6 years ago, that in the pandemic. At the time, I didn't know what a 401k was.

[00:12:32]The only thing I knew is that my company was putting money if I was putting money on my 401k. I accumulated a good chunk and I used that to buy my first home. My point is that I didn't know anything about 401ks, Roth IRAs, or high-yield savings accounts, or how to have like a budget, or you have to have an emergency fund. I didn't know anything about that.

[00:12:55]I am a first-time immigrant here in the United States. And when I first came here to the US in my early 20s, I wasn't thinking about investing or saving money. I was thinking about how to survive the day-to-day. But now that I am in my mid-30s, I feel behind.

[00:13:11]And I'm not comparing myself to people around me. I am thinking about time and how fast things happen, how fast we are getting older, and it scares me a little bit because I don't want to work until I'm 63 or 65 to retire.

[00:13:30]Honestly, ideally for me, I would love to retire when I'm 40.

[00:13:34]And that is in just a few years from now.

[00:13:37]And for that, I need to be more aggressive into investing and saving money. I wish that financial literacy was a requirement in high school and college or maybe earlier. And I say this because during my time in college, and I was in college for a long time here in the US, I never had a class that taught me about Roth IRAs or 401ks or how to invest in the stock market.

[00:14:01]I never had classes like that, ever.

[00:14:05]I seriously wish that someone taught me these things.

[00:14:08]And I am learning now, like I don't know everything. I am still learning. I am still, you know, reading about it.

[00:14:15]Everything that I'm learning, I would like to share with you guys. Uh my content is going to change a little bit because I'm not traveling at the moment.

[00:14:23]But if you're curious to know more about investing and saving and how to have a budget and all of that, follow my account. I am learning still. I am not a financial advisor whatsoever, but I love the topic and I would like to share what I'm doing with my husband to build wealth and to live more intentional.

[00:14:42]>> I had a 401k from my job that I got laid off from a few months ago. I was only there for less than a year, maybe like 8 months or so, and I have a little less than $5,000 in my 401k that they rolled over to a company to kind of like manage. So, I'm trying to figure out, should I cash it out so that I can pay off my debt? I don't feel like calling into Dave Ramsey or any of that, but I know one of y'all on here, somebody on here knows something about that. I know I'll have to pay a penalty or some sort of fee, and I'm going to call in to see like if it is um like worth it, but I just don't You are there tax implications to doing that as well?

[00:15:23]Because I don't know. Has anybody ever taken money from your 401k before? And if so, like what happened? Do you regret it? Was it a good decision? Did you have to pay a butt load of money? Cuz if so, then I don't want to I don't want to do it. But if I can take, you know, extra $4,000 and pay off a credit card, I don't mind doing that.

[00:15:44]>> You know, I know a lot of y'all be getting loans on y'all 401k at work.

[00:15:49]Now, if you in a emergency situation and you need to get a loan, it's best to borrow it from your 401k cuz that's your money. But my thing is this, a lot of y'all get loans in your 401k every chance you get. Let's think about that for a minute. If you get a loan on your 401k, it take you about 3 to 5 years to pay it back. So, if you can afford to pay it back 3 to 5 years, get extra money taken out your check, it's crazy to get the money every time you get a chance? CUZ YOU AIN'T DOING PAYING YOURSELF BACK. Why not manage your money well enough where you don't have to do that? So, people that get their money out of their 401k every chance they get, only thing I can say about them, YOU'RE A [ __ ] IDIOT.

[00:16:36]>> PEOPLE OUT HERE MISSING life because they don't want to take money out of their 401k and retirements. And then they're going to turn around and they're going to get to retirement age and they're either going to be too scared to retire because they're going to be afraid that they're going to die.

[00:16:52]Or they're actually going to retire, have absolutely nothing to do, and then they're going to die. And all of that money that they saved so so much for and that they struggled so hard to save for retirement is going to end up going to their kids that they're going to end up blowing.

[00:17:10]>> And the actor from Dawson's Creek's death has solidified it for me because we are of equal age. He's probably like 4 years, 3 years older than me, but suddenly, you know, battling cancer and you're gone. So, all of this hard work you're doing to save back for these retirement golden years and you don't even get to reach it. My huge hefty life insurance policy will be my generational wealth that I'm leaving for my wife and kids, but the money that we're saving right now, my wife and I are going to enjoy before I die.

[00:17:42]I'll leave the kids paid off cars. I'll leave the kids paid off houses. I'll leave the kids gold. I'll leave the kids silver. I'll leave them all the guns and they can trade all that [ __ ] and do whatever they want to with it, but the money, I'm spending it. Yeah, I want to take like 250K out of my 401K, pay the penalties, and just pay off all my bills. And then put more money back into my savings cuz I'll have more money to put back because I won't pay them bills.

[00:18:09]Anybody ever did it? Has anybody ever withdrawn from their 401K to pay off their house, pay off their cars, and then just started putting money back into their 401K since they got rid of all of those payments? And if you did, what was your penalties because I am seriously considering that right now.

[00:18:28]>> So, I might have used my 401K to help me pay down some of this debt.

[00:18:33]Before y'all judge me, hear me out. This is part four of my debt diary series where I am paying off $40,000 worth of credit card debt while still building the life that I want. Honestly, I didn't have that much in my 401K to begin with, but if we're being honest, how many of us know someone living a good life in retirement strictly off of their 401K? Your 401K is not enough to retire and live life for the next 40 years. It's not. I don't care what nobody says. You're going to have other investments or you're going back to work. So, I never really been one to bank on my 401K. Honestly, I'm retired now. Real estate is my retirement.

[00:19:12]Taking that money out of my 401k, helping me pay off this debt so that I can be in position to get more funding to buy more real estate is going to serve me so much better than it just sitting in that account. So, I know it's not really financially responsible, but honestly, I've never been the one to play by the rules. If I have a goal, I'm going to do whatever it takes if it makes sense to me to reach it. Don't go digging in your 401k for like little minor stuff. Please don't.

[00:19:41]If it's not going to give you a bigger return, it's not going to give you a return at all, leave it in your 401k.

[00:19:46]>> Because what's going on in today is causing you financial hardship, taking money out your 401k does not make you financially illiterate. Don't let nobody tell you that. Come on to Simple Little T with Auntie, let's talk about it. Your 401k is set up for your retirement, but you think about it. In this day and time, if the cost of gas, the cost of groceries, or anything else is costing you financial hardship, why not utilize your own money? Now, a hardship, I have to break this down, is when you are going through hard times. Something unforeseen happened, and you now need to pull money out your 401k to put yourself, place yourself in a better position. That means to permanently take your money out your 401k. It is not advised for you to permanently take no money out, but there's a difference.

[00:20:33]There's something that you call a 401k loan, which is depending on where you work, you can take multiple of those loans out of year. What is a 401k loan?

[00:20:42]You take a loan out for the amount that you need to relieve yourself of some troubling times that you may be having, and you pay yourself back per paycheck.

[00:20:51]For an example, you need a thousand dollars today. You don't want to have to borrow none from nobody, or borrow from a loan company to where it's going to put extra money coming out your paycheck every time, you know, big old amount.

[00:21:02]You got to pay a big amount back. Pay their loan. You got to pay the whole amount back, or you got to pay three hundred and some dollars back every time you get your paycheck. No, no, no.

[00:21:10]Utilize that 401k loan to where you can break it down on how many payments you want to pay. Say you want to stretch it over 24 month period to where you ain't got no more $23 coming out your paycheck every time. $23 is better than that 300 and some dollars having to pay it all back at one time. And then, the catch-22 is you're not paying nobody else back.

[00:21:31]If it came out of your 401k as a loan, you pay yourself back. You are the lender. IT'S YOUR MONEY. YOU'RE THE LENDER. SO, you're taking money from yourself, but you're also paying yourself back. And before y'all get to holler about, "What about the financial gains and losses?" You still will make gains and losses because you're not going to remove all your money out your 401k. You're going to take a small portion, a $1,000 loan, $1,500 loan, $2,000 loan, whatever you need to place yourself in a better position. Again, gas prices, grocery prices, everything is going up. Why sit around and have yourself in a strain or get on here bugging and bumming somebody else when you already have the money there? Who's to say, you know, when you get 65, 75, you'll be able to enjoy your 401k money?

[00:22:15]It'll be left to your children or whoever your beneficiary is. Why not utilize some of it now if you need to?

[00:22:21]If you don't, then this video ain't for you for you from the jump. BUT I'M TALKING ABOUT logical thinking people who do have strains and struggles. Some people ain't married. WE GOT SINGLE parents on here that may need to utilize. It's got different people and different financial situations who may have to utilize the money they already saving for when they become 65 or better years old. That's it. That's all, y'all.

[00:22:43]You know, don't be Don't get on no top of nobody head because you never know what nobody going through. And before you be right here stressing and straining and going through stuff you ain't got to go through evictions, repossessions on your vehicles, and all that other good stuff, baby. Utilize your money and pay yourself back. That's it. That's all. Bye, y'all.