Take the other 75% to use for your debt reduction plan. For example, if that number is $200, your savings amount would be $50 and your debt reduction plan amount is $150. The amount isn’t that important. What is important is that you …

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Pay Off Debt, Planning Ahead

Under most circumstances, if you cash out your 401(k), you will have to pay federal, state, and local income tax.

You will also owe an early withdrawal penalty - 10% - if you are under the age of 59 1/2.

In almost every case, for every $100 dollars you withdraw, you will pay between $25 and $50 dollars in taxes and penalties.

In other words, unless you are doing so to avoid bankruptcy, it’s a bad idea to cash out your 401(k) and pay off debt.

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401 k, Bankruptcy, early withdrawal penalty, income tax, News, Pay Off Debt