Author Topic: Use company match 401k to increase spending money  (Read 3846 times)

Offline Erigorn

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Use company match 401k to increase spending money
« on: October 18, 2013, 08:33:07 PM »
Hi all,
I was recently thinking to myself about my 401k and if i should keep contributing. The question i posed to myself is what chance i see of the dollar existing(or having any value) in 30 years when i could pull it out for retirement. My thought is very little chance so I thought I would stop contributing to help work on my preps faster. Then i thought of the following. If someone sees some flaw in my plan please let me know. 

My company matches 50 cents on the dollar up to 4%. So my 4% is matched by 2%. My plan is to keep contributing but then turn around and every 3 or 6 months pull some or all of it out. I know there is a penalty but here goes my math. (numbers made up for simplicity)

Contribute $100 a month.
Match makes that $150.
Assume no growth.
Pull out penalty of 10% = $15
Remainder $135
Tax at 30% of $150= $45
Take home $90

I see that better than:
not contribute $100
Tax at 30% = $30
Take home $70

Seems like the penalty always looks bad because it is taxed and the 10% penalty but if you were just going to stop contributing then the 10% penalty is less than the 50% match.

Does anyone see anything wrong with this? Limitation of frequency of distributions. From brief reading I expect you could do it monthly if you cared. I will probably think about it a bit more and then pull the trigger in January to avoid the tax for a year.

Oh, I am only 40% vested at this time so i would have to wait to pull the full amount out until later but the math is the same but just delayed.

Thoughts?

Offline fred.greek

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Re: Use company match 401k to increase spending money
« Reply #1 on: October 18, 2013, 10:25:03 PM »
There is probably some minimum time period before you are "vested" (own) the company matching.  That said, speak with your company about the 401k custodian…

The government limits on your 401K are described in IRS Publication 560:
http://www.irs.gov/pub/irs-pdf/p560.pdf

Gold, silver, real estate, private loans, a whole “universe” of investment options… The limits imposed on your 401K are quite probably NOT set by the government, but rather by the “tunnel vision”  trustee firm selected by your employer.



Offline Jack Crabb

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Re: Use company match 401k to increase spending money
« Reply #2 on: October 18, 2013, 11:22:26 PM »
Why is retirement savings not part of your preps? If it is, let your employer add to your efforts.

I've been doing the survivalist/preparedness thing since the early 1970's. In the last 40 years, a whole lot more people have retired than have fought off Zombie hordes. I would expect the next 40 years will be similar.

Offline Erigorn

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Re: Use company match 401k to increase spending money
« Reply #3 on: October 19, 2013, 09:21:29 AM »
Thanks for the perspective. I've only been somewhat seriously prepping for 5 years and don't have a long term perspective. With your much longer term view/perspective do you think the collapse of the dollar can be pushed out another 30?

As for retirement savings I feel like I am significantly further ahead in that area than some more basic things. Just trying to get balanced. It will get there over time either way but just looking to try to balance them quicker.

Another option would be to get the company match, pull it out with penalty and then invest in you own IRA or even Roth IRA. If you don't like the investment options or are doing some self directed ira where you can hold physical silver or something. If you pulled out and put back in an trad or roth ira you would have that flexibility while still getting the bulk of the employer match. A bit better than just putting it in and not getting a match.

Offline cheryl1

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Re: Use company match 401k to increase spending money
« Reply #4 on: October 19, 2013, 10:20:40 AM »
How are you going to pull it out? You have to beg and bleed to get your money out without quitting your job. I clean out my 401k everytime I move jobs, because our retirement is in our business and in land. But getting to the $ is the hard part.

Offline FreeLancer

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Re: Use company match 401k to increase spending money
« Reply #5 on: October 19, 2013, 11:09:06 AM »
I've been doing the survivalist/preparedness thing since the early 1970's. In the last 40 years, a whole lot more people have retired than have fought off Zombie hordes. I would expect the next 40 years will be similar.

+1

Four decades ago my old man was convinced the world would go to hell in a hand-basket before I ever made it to adulthood, so he didn't see the point in saving for retirement, especially since in his mind "the market is legalized gambling run by corrupt bankers."  He also used lines like "lay up your treasure in heaven" when the conversation turned to investing.  Reality started to creep in at 50 and he started throwing money into the market mostly on emotion, buying high and selling low, and now that he's retired doesn't have a whole hell of a lot to show for all those decades of upper middle class income. 

He's getting by on Social Security (which is ironic because he always told me as a kid that it wouldn't ever be there for him) and hoping to prolong the time till he has to dip into his meager retirement accounts (which are all sitting in cash because he's totally afraid of stocks).  He's debt free, frugal, has a nice little homestead, grows some of his own food, and has self-reliance skills, so he can get by without a fat retirement account.  But the sad thing is that he could have easily done both (especially if he'd started early), and have had a lot more options today, as well as a lot less worry. 

Offline RitaRose1945

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Re: Use company match 401k to increase spending money
« Reply #6 on: October 19, 2013, 08:38:38 PM »
Yeah.  While I understand that my 401k could be flushed down the toilet before I retire (if I ever actually do), I still see that it builds much faster than if I had my grubby hands on it.  I plan to roll over my 401k when my previous employer finally cuts their ties with me in June.  I'm not touching it.

On the other hand, I also have a teeny tiny pension that would pay me something like $90 per month when I retire.  Not worth keeping.  But it's just enough after taxes and penalties to cash out and pay off my car loan when June gets here, with maybe $1,000 or so left over.

I know it may not be mathematically smart, but it's good for my head to have a paid off car.

Offline Jack Crabb

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Re: Use company match 401k to increase spending money
« Reply #7 on: October 20, 2013, 08:44:51 PM »
Thanks for the perspective. I've only been somewhat seriously prepping for 5 years and don't have a long term perspective. With your much longer term view/perspective do you think the collapse of the dollar can be pushed out another 30?

I approach everything with a sense of balance. Work a little on retirement savings. Work a little on personal protection. Work a little on health and safety (food, water, heat, etc.). It is not an all or nothing circumstance with anything.

I also approach things that there are possible events that exceed my resources. It is within my resources to prepare for a disabled vehicle (AAA, cellphone charger, etc.). It is within my resources to prepare for loss of electric (batteries, flashlights, liquid fuel stoves). However, for things beyond my resources such as collapse of the dollar or global _____, I'll do what I can with what I got while it lasts.

One can always what if ___ occurs. One also needs to consider what if _____ does NOT occur.

If one accepts that retirement savings is part of the overall plan, then taking free money from one's employer and leaving it in the 401k/IRA to further that goal is a given.