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Also sorry! Update, it’s a simple IRA, not a 401K.
Absolutely not since you would pay taxes and a 10% penalty. I’d recommend opening an IRA at Vanguard instead of putting it in the 401k and depositing the check in there ASAP. If you don’t deposit it within 60 days you’ll be hit with taxes. In the future do a direct rollover. 401k rollovers can’t be messed around with and you really have to understand what you’re doing. Otherwise you’ll be hit with taxes and fees. If you want to pay off the student loans stop investing and put everything toward the debt (shouldn’t take too long with just 15k)
https://www.ellevest.com/magazine/retirement/401k-rollover-mistakes#:~:text=If%20you%20take%20the%20money,hit%20you%20with%20those%20taxes.
I would be really careful about using money from a retirement account to pay for something else when you’re 27 though. More than likely there’s some kind of fee for doing that that makes it not worth it
No, no, no. Best to rollover 401k no penalty, keep contributing at least the max the company matches. Bite the bullet on loan. Any luck more student loan forgiveness coming.
Unless the interest on the student loan is higher than the tax and penalty of using 401K money, it’s not a wise idea. Best route is to pay down the student loan in large chunks for a while so that it’s fully paid off, or at least the monthly interest on the remaining balance becomes so low that it’s not bothersome. At 15k the interest is probably still annoying, but if the balance is lower then the interest might not bug you as much. I’m also waiting on what the outcome of the elections is. If Democrats win all 3 Pres/House/Senate they may go ahead with that 10k or 20k loan forgiveness plan that was blocked due to the need for legislative approval. I won’t pay anything under 10k until the outcome of the elections, just in case they do win and automatically take 10k off the loan balance lol…
I recommend considering the interest rate on the loan vs. the return on investment in the IRA. Say the loan has an 8% interest rate. However the IRA got a 20%+ return last year assuming you invested in the S&P in a low cost index fund. You're much better off rolling over the 401k.
Don't ever withdraw from a retirement plan before 59.5. The penalities are incredibly steep unless you absolutely need it due to hardship requirements. Another option would be to borrow against the retirement plan if the company allows it. Depends on the interest rate of the student loan vs the interest rate on the 401k repayment but if you have no other cash to pay off the student loan and you really want to get rid of it then this is an option. Only thing to be aware of is your repayment to the 401k loan is post tax dollars. In short the only time to use retirement money for anything is if it helps you get a more stable asset (i.e. primary house) or you're using it to pay off a predatory debt with an absurdly high APR that significantly outpaces any returns you'd otherwise generate by investing.
No. You will end up with a tax penalty if you take any of that money and do anything other than transfer it to the new 401(k).
Just continue to pay off the student loans, as much as y’all can. That would be the wisest move, honestly.
To confirm - you had planned a rollover from a Simple IRA to a 401k and now having second thoughts and may use $15k to pay down the loan?
If so, then it’s same situation. Simple IRA contributions are tax free, so if you withdraw them instead of rolling over you’ll have to pay tax + 10% penalty this year on the amount withdrawn.
Reading the IRS site, it appears it would be a 25% penalty if you started in the plan less than 2 years ago
The provider you are transferring funds from will send a distribution form to you and the IRS (1099-R)
If you don’t rollover all of this amount your tax software/preparer will calculate taxes & penalty on your tax return.
IRS rules here -
https://www.irs.gov/retirement-plans/simple-ira-withdrawal-and-transfer-rules
Yup, we made this mistake last year and paid for it in taxes. On the plus side loans are paid and the only debt we have is our mortgage. Unfortunately he ended up paying close to double in taxes. So he used the 401K money to pay that since it was already in his account. And now used the leftover to put in an HYSA for now. He’s already started to accumulate more in another 401K from the new job, so we kinda started over but it’s not the worst. He’s 28 and it was a dumb not thought about enough mistake, but thankfully we’re gonna be okay!