Should I Cash Out My 401(k) To Pay Down My Mortgage?

Should I Cash Out My 401(k) To Pay Down My Mortgage?

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• The Ramsey Show (Highlights):

[Ryan_DeWitt]

Poor guy may not be the smartest financially, but it sounds like he is learning and trying to make the best of a bad situation. I hope he succeeds.

[silverltc]

Good to see men making sacrifices for their kids. Nice work.

[ariefraiser]

If he has custody of his kids why didn't I hear anything about his ex wife pay child support?

[KrystalToddCPA]

401k are good to reduce your taxable income but it’s crazy that you have to get penalized 10% for taking out YOUR MONEY!

[marlynsantos]

Whew.. I clutched my pearls when he said $1000 on the first mortgage. That way too high for his current income range. I'm glad he clarified. Hopefully he makes it through this rough time.

[mortgagesmademanageable]

Dave: why did you keep the house?
Caller: stability for my children
Dave: okay, now back to your finances 😂

[BigRed]

Dave surprised the kids live with him is hilarious because we all know courts favor the mothers over the fathers

[Dranach]

Went against Daves advise. Took my 401k out and paid off the house. No 10% penalty because of the CARES act withdrawal provision. Maybe retirement suicide but still have another 20 years to retirement.

[SUPERDURANGO]

Example. If he took 100k from 401k. Gets 30% penalty. That means only 70k goes towards the mortgage. He will lose way more thank 30k in interest. If he continues to pay his normal mortgage payment. It will take years of interest by the time his principal goes down 70k.

[greenAbbot]

By Dave’s logic, you should NEVER take money out of a 401k because it’s like borrowing money at 20% (or whatever your tax rate is). Still a terrible rate even without the 10% penalty.

Except paying taxes on income you have deferred the taxes on is in no way like borrowing money. I agree with Dave that you should never use retirement money for non-retirement expenses, but he uses this same analogy every time and it never makes sense.

[Erika]

Good advice from Dave! 30% interest is WAY too high! I hope that Mervin sorts it out soon!

[GenExDividendInvestor]

I can't think of too many reasons to cash out your 401k.. Maybe to pay a massive medical bill if you have no other options, but aside from that...

[rsimpkinsg]

It’s technically not 30%. Considering he is in the same tax bracket when he retires he will have to pay 20% or higher when he withdrawals the money so it’s really only 10% for the penalty. If it’s enough to pay off the home loans he would instantly free up his money and should be able to do full max outs and invest like crazy.

[indman]

Taxes will be much higher in the future, Dave should have about his interest rates on his loans

[loveholidaybyviction]

Is there a penalty and taxes once you turns 60? Would you recommend paying off the mortgage at that point if you have a small 401(k)?

[bhupesh]

Only 29% of the actively managed funds outperformed the S&P in this crazy bull market.
No need to buy mutual funds and pay exorbitant fees..guys just buy low cost index funds.
Dave does good for humanity but following someone blindly is not good.

[PassportBrosBusinessClass]

MARRIAGE is an INSURANCE POLICY on a woman’s rapidly depreciating market value...

[NeoAndersonReloaded]

If you do a 401k do a Roth. After 5 yrs you can take out what you put in if you need it without penalty.

[rodrigoelgu]

I didn't hear Dave say anything about child support 🤔

[DaveHagerty]

There's a popular steamer/YouTuber filing for bankruptcy, his name is DSP. Please contact him, he'll give you a ton of content.