advice on some old 401K's

I have been lurking on this forum for some time now. Hardly ever posting. However I have a financial question and thought who better to seek advice from than from a group of people who have their finances in order enough to own a ferrari. So here goes. I have been working in the I.T field for about 10 years. My first two places were for private companies. Both had 401K options, so I put in to them. About a year ago I took a job with a state University (NY). I took a 20K a year pay cut for this job. I took it because I was sick of a long commute to work. I wanted to be closer to home and spend more time with my young kids (4y/o and 2y/o)also this job is less stressful then the previous 2. The job has a pension (that was another selling point) neither of my other jobs had a pension plan. Right now the only thing I have toward retierment is my pension and those old 401k's (which I am no longer contributing to), my wifer also has a pension with her job. The 401k's both have about 30K each in them. My question is basically what should I do with them? My wife and I were wondering about maybe cashing them out. We are looking to do some work on our house and will only do it if we have the cash, we have savings but have taken a chunk out for some surgeries on our dog (7k over the past 5 months)plus some other home improvments we did over the summer. we generally like to have over 3 months worth of our expenceses just sitting in savings and it has dropped down to less then 2. And it is worrying us. I am 33 y/o. any advice would be greatly appreciated.

 

If you cash out your 401k's, you have to pay federal and state income tax on those monies as well as a 10% early withdrawal penalty since you are under 59.5. Additionally, you would be giving up the ability to have several decades of tax deferred growth on those monies. If you are concerned that you do not have enough liquid cash on hand, the last thing you should be doing is spending money on unnecessary home repairs.

You have access to your 401k monies if you were to need them. Take some comfort in that. Be cognizant of your spending, replenish your savings account to a level where you are comfortable, then consider spending discretionary money for home improvements.

 

+1

Look up how well funded your university's pension plan is via the internet. On average, I expect pensions to be reduced and/or contributions to be increased in these plans, especially for the younger employees.

 

With all due respect Jay, you're 180 degrees out of phase.

Your pension fund is probably unfunded and is not a particularly safe investment. (google unfunded pensions or new york unfunded pensions) Your old jobs had something FAR better than a pension, they had a 401k.

With a pension, you're counting on politicians and labor unions to manage your retirement. -- And we all know how well those two groups manage money.

With a 401k you mange your own money. Stop thinking of your 401k as a slush fund and think of it as your life savings.

google vfinx then google dollar cost averaging. Then go back and reread the other 2 replies.

Lastly if you do have an emergency you can borrow against your 401k for like 2% interest and you avoid the 10% penalty.... but that's for an emergency. -- If you have to borrow money to pay for 10s of thousands of dollars of surgery for a dog, it's time to put the poor thing down.

At 33 years old, vfinx is your best friend.

Now I hope I don't twist an ankle getting off this high horse. (sorry)