Withdrawing funds from my 401k plan that was rolled into a IRA?

I'm in a pretty bad place financially and my only option is to withdraw the funds in a IRA that I rolled my 401k into. I know this is not a smart move but at this time my family only has 1 income and my credit is starting to suffer. I've had perfect credit until now and I just can't afford to let it get worse. I have faith that things will get better I just need to stay caught up with my financial obligations. Thanks for any advice.

Not knowing how dire your situation actually is, I can only give one piece of advice:

Be sure you are keeping a realistic perspective on what you situation is and what the implications are.

Many people put pride in keeping a credit score of over 700 and being able to pay their bills on-time or ahead of time every month with more than the minimum payment. Therefore, making ONLY the minimum payment or something similar can seem catastophic.

Keep in mind - your retirement savings are protected. They are providing security for the future. If you take money out of this fund, you are robbing yourself and potentially creating more problems for your future.

1) If you are paying more than the minimum balance on your bills, STOP. But note that this is a short-term solution to get you through your current situation.
2) Eliminate any unnecessary expenses. People consider all sorts of things ESSENTIAL that are really not. Examples: cable television, name brand foods, bottled water. You can reevaluate your phone calling plans (perhaps downgrade).

Regardless of the thou-shalt-not-take-money-early commandment, ya gotta do what ya gotta do.

Advice is this - REMEMBER TO PAY UNCLE SAM, because Sam WILL know about this.

Don't know your age, but there are several disadvantages. You will need to request about 125% of the amount that you need, 10% will be deducted as a tax, another 10% will be deducted as a penalty (unless you are 59-1/2).

This will make you inelgible to contribute to this fund until the next open sign up with your company. Consequently your employer will not make any contributions either.

I did much the same about 10 years ago, and it ended up costing thousands. Not trying to chastise, but it will end up costing you in the long run.

Only piece of advice I can give is documenting a medical hardship or showing that you will lose your home if you do not make the withdrawal. This could save the 10% early withdrawal penalty. IRS has some pretty tough rules, you will have to dig up quite a bit of paperwork.

Talk to your HR or plan adminstrator at work for more details.

Good luck!

First of all its an IRA not a 401k so it has nothing to do with your current employer. See if you can get a loan on the IRA instead of an early withdraw. Sometimes you can get a loan it just depends on where the money is for the IRA.

Have you tried looking at your home? Call a good mortgage broker and see if you can refinance and roll all your debt into a new mortgage. I know this may cost some money but it may equate to the amount you will pay in penalty on your IRA early withdraw.

Maybe even ask to do a home equity line to pay off your debt. Get creative. It is not a good move to tap your IRA.

Good luck.

sounds like you've already made up your mind and are just looking for validation. Only thing I have to say on this subject is to look 10 years down the road. If you declare bankruptcy or simply miss a few payments now and then your credit will be repaired in 7-10 years and you'll still have your retirement. But, if you take the IRA then you'll have repaired credit in 7-10 years and you WONT have your retirement.

I'm all for paying off your debts but not at the behest of your retirement. You'll be more of a burden on society if you hit age 65 and don't have the resources to survive then if you fail to pay on a few thousand dollars of debt right now.

The only reason I advocate taking retirement money is if you're paying it to yourself (ie income) or using it for major medical expenses.

Go to www.ira.com and read about withdrawls from IRAs. There you'll learn the penalty and tax consequences so you know in advance what you're getting into.