401k Decisions

Since I recently changed jobs, I have to make the decision as to what to do with my 401k earnings. Right now, it stands at approximately $1200. It’s not much, but it still could be what gives me a small boost up in the debt war.

If I were to request a check, they would automatically withhold 20% which would give me approximately $960 after that withholding (and possibly subject to more withholding later when I do my tax return). But, if I transfer it directly to my IRA (which I haven’t contributed to since I opened the account 7 years ago…), I would have no penalty of course.

It comes down to security now versus security for the future. That money will be worth a lot more when I retire in 40-45 years (I plan to work beyond the standard retirement age of 65 should health allow me) and contribute to some sound mind currently knowing that I am saving for my [distant] future. The interest earned on the IRA would be far greater than the interest paid on the credit card. But, flip side, there’s a lot to be said for taking it and paying off a credit card for the sake of sanity.

What would you do? It’s such a small amount that I’m struggling to decide what to do!

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4 thoughts on “401k Decisions

  1. Probably a tough decision now, but you’ll always face the decision of having $1 now or many more later. Go with the many more later – the future you will thank you for it. Think of it another way – you worked hard and (sacrificed) to save that money already – why just throw 20% of it away? Assuming you work 40 hours one work week that’s like saying you’re working 8 hours for no pay. (I realize the analogy is very watered down!) I don’t know about you, but I sure as hell don’t want to work for free….

  2. thanks for making the change to the feed :). If you have no other retirement savings then i would move some on to the IRA. it’s amazing what compound interest will do…and that can grow even if you don’t add to it for a while. If you have some other retirement savings then I might put that to my debt.

    • I made a change to the feed? Or are you saying my recent posts are boring? 😉 My new job automatically enrolls me in their 401k at 6% contribution once I have been there a few months, but that won’t be until the spring. I do think about how that compounded interest in many decades will help make for a more comfortable retirement…

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