making a big move soon, and will need to withdraw money (need opinion)So

[semidevil]

So due to personal reasons, I will be leaving the country by the end of this year. I have money saved up, but due to the quick circumstances and all the things I foresee I need to do, I will not be surprised if I will need to withdraw money from my accounts. I'm trying to figure out the best way. So here is what I have to work with.

 

29 years old male

savings: I have about 5k in a ING savings, and about about 7k in a trowe price ROTH IRA. Both of which I can withdraw.

Debt: about 6k in credit cards.

Asset: I do own a home. Purchased in 2006, refinanced once, so the equity is not as high as expected.

Retirement plan: I have about 30k in 401k.

 

I'm anticipating to get a job over there once I move, but I do need to bring some cash for downpayment and deposit for the place I will be living in. I want to be able to have 5k in cash with me for when I move.

I need to sell my car, and I might be upside down on the car (I'm paying it on a .99 interest rate, but I bought add'l warranty and also gap insurance, so I'm doubting I can make profit off of the car)

As for the house, it has been leased to a family for about 4 years now. they want to buy it, but they are still working it out. If anything, they will continue renting it.

 

assuming I am upside down on my car, and I'm determined to have disposable cash with me, I know I will have to leave the debt on my credit card and find a way to pay it monthly until I am at a good spot to work it down.

 

So worse worse case that my ING savings and IRA is not enough and I need more cash, where is the least hurtful way to get my money? It wont be cash advancing my credit card, I assume. Is it better to get an home equity loan? I even thought about borrowing from my own 401k. What's the smartest way? should I just bite the bullet and borrow money to pay off the credit card? at 29, is it bad to borrow from retirement account?

 

I know that I might be back in the states, so I don't plan to leave my debt, so I defintly want to continue paying what I borrow.

 

thoughts?

[Kevin20]

Well my first impulse is to say you can't afford to move out of the country, forget it. Or delay it. Sounds like you're going to plant yourself in another country, hoping to find a job in a foreign land as you quickly eat through your savings. Sounds tricky to me. Or maybe I'm misunderstanding that part.

 

But OK, if you're hellbent on doing it. Or you're running from the law (which is what it kind of sounds like... feel free to elaborate on your story...)

 

Borrowing against the 401k is not an option. It appears you're going to quit your current job right? When you leave a job, any 401k loan is due to be paid back immediately, or due very shortly (because, obviously, your employer can no longer deduct repayment from your paychecks if you don't work there.) If you took the loan now, you'd have to pay it back by the time you're leaving. And you can't leave the 401k there at your employer, and borrow later after you've quit.

 

Now Lord knows I don't want you to take money out of a 401k. But if it came to it and you decide that's your only source of liquidity, what you need to do is this:

- Rollover the 401k into a traditional IRA account.

- Then make a premature withdrawal from the IRA account and suffer the heavy tax consequences. (Note: the tax consequences will be less if you wait until after January 1st to raid the IRA, since you likely will be unemployed for some time in 2013, sounds like).

- The trick here is it takes time for those transfers to be executed, and sounds like you're on a tight schedule at this point.

 

- As an alternative approach you can take a direct cash distribution from the 401k (receive a check). Then you can keep what you need, and deposit the rest in a new Traditional IRA. You'd only be taxed and penalized on what you don't re-deposit into an IRA with something like a 60-day window. However your 401k administrator may preemptively withhold the taxes anyway before you get the check.

 

I'd probably not pay off the credit cards unless you're sure you have plenty of cash to get you through. It sounds like the most precious thing you could have for awhile is cash on hand.

 

Personally I can't imagine owning a house here while living in another country. If you can't unload it, I certainly would not take on more debt against it. I'd rather tap into the 401k than anchor myself even more tightly to the house.

Edited October 19, 2012 by Kevin20