With the current market conditions, many people are trying to obtain money from whatever source they have available but your 401k should not be one. Cashing out now, with the markets down almost 50%, is not only a terrible choice to make but also a very expensive one too.
Markets will recover, maybe not as soon as you want but when they do it will be a rapid move up. Many people can handle the fact that their accounts are 50% down. Although, I am not down that much, I am still in the market because when it does recover I want to be in to enjoy the ride up.
Cashing out your 401k right now will cause you to realize losses that you may not be able to account for on your taxes. Plus, you have to pay early withdrawal fees, federal, and state income taxes out of what little bit you have left over. If you can wait a couple years, you will be thanking yourself. As for me I am still investing but I am a bit more “choosier”, as it were, now than before.
Look around and see what other options you have available and try to use them. If you have nowhere to go then at least think long and hard about cashing out your 401k.
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