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How to fund my fresh start - 5/2/2008 1:09:08 PM
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tickerrose
Posts: 4
Joined: 5/1/2008
Status: offline
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Hi, My name is Erika and I have been posting in the marriage forum recently after my husband took off for Colorado, leaving me in upstate New York and is now saying he wants a divorce. I have no idea what to do with most of this, but I do know that I can no longer stay here, where we had our life together. We are fortunate that we have no children and no real property to split up. We rent and have few bills. While he left me with all of our debt, I feel lucky it is so little and I can most likely swing it on my own. Currently, we owe a $300 to the credit card, $5,800 on the car loan (he left me with the car), and my $19,000 in college loans. I have worked very hard over the last few years to get us both out from under serious debt (leading to serious resentment by my husband at my unwillingness to spend on countless needless wants). Since he was working very little and spending very much during our last few months together, I have fallen behind on my college loan payments by $700. With a few weeks at my full time job and working extra shifts as a waitress during my off time (keeping busy is a very good thing for me to do right now) I feel I could be paid up in a month. Right now, I am sleeping in my mother's bed and living out of bags. I can't sleep where we used to and live there anymore and am in a very "temporary" state. I am looking forward to moving soon and have set a deadline for the first of June to go to Sterling, Virginia. I have a bachelors degree from a top school and four years solid experience as a reporter for a local newspaper. I feel my potential to make money there far outweighs what I am pulling in here and also need the change of scenery for a fresh start.
In order to do this, I will need some money to get on my feet. I know this is a subject that makes most people jump up and scream at me, "NOOOO!", but I am considering cashing out my 401K as a means of starting over. I only started the 401K a year and a half ago and currently have about $6,000. While I know there are penalties involved, I have no understanding of what they are and how I would go about doing this. I feel at 30, I will still have a long enough career to establish a new retirement fund...
I am sorry this has been so long, but I would so greatly appreciate any advice on this matter.
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RE: How to fund my fresh start - 5/2/2008 1:24:50 PM
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Jenny-Fair
Posts: 6229
Joined: 4/11/2005
From: WA
Status: offline
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I can't tell you whether to cash out or not, but I CAN tell you to get yourself a legal separation ASAP before your husband accrues more debt that you will be liable for!
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My Blog
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RE: How to fund my fresh start - 5/2/2008 2:06:24 PM
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Psalm22
Posts: 401
Joined: 4/18/2005
From: Alaska! Breaking is in progress, soon be spring!
Status: offline
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If you cash it out, there will be a 10% penalty in addition to regular income tax due (there are a couple of ways to avoid the penalty but based on the you supplied, none of them apply). Also, your employer may do a backup withholding of 20% when distributing the 401(k). More detail info can be dredged at www.irs.gov.
Since the balance is small, and you seem young enough to be able to recoup the "loss" quickly, I'd say go ahead.
But given your soon-to-be ex has already stuck you with the debt, be very cautious on the timing of when you take the money. Getting a little bit of legal advice, if you haven't already done so, would be wise before cashing it out to about unpleasant surprises.
_____________________________
And the Spirit and the bride say, "Come!" And let him who hears say, "Come!" And let him who thirsts come. Whoever desires, let him take the water of life freely. Rev. 22:17
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RE: How to fund my fresh start - 5/2/2008 3:35:58 PM
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metoo
Posts: 38
Status: offline
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I agree that you should get a legal separation and protect yourself from additional debt he may accumulate.
For many, many, many reasons I think you should NOT tap the 401(k). It is just never a good idea. I would suggest that you stay where you are a little while longer and save what you need to make the move. I would also suggest that you get a job in your new location before you move. While "the grass may seem greener" there, make sure you have a job before moving there. A job where you do not want to be is much better than no job somewhere else.
Also, as unfair as it may seem, you may actually owe your husband some of the money in the 401(k). If you have already spent it, that would really add insult to injury.
I am sorry for the place you have found yourself in. I know it is not what you expected when you got married.
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RE: How to fund my fresh start - 5/2/2008 6:51:07 PM
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eaglelady11
Posts: 402
Joined: 7/20/2005
Status: offline
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DO NOT cash out that 401K, leave it there. get a legal separation and divorce so his debt doens't beocme more of your debt. is his name on the car? Sue him for half the money. or maybe, ask him, see if that works.
work and pay your own way through life, you are so much better off without him.
Others will disagree with me here, but contact the Suze Ormon show, and write in and ask what she says. Or write to Dave Ramsey or Crown Financial and ask their advice since they are Christian based.
sorry if I sound harsh, but dont' be a victim, be a victor!
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