# SEPP from 401(K)



## Gseries (Jan 6, 2013)

Any 401(K) experts out there? I'm drowning it debt. I have a pension, and separate from that small IRA that we robbed last year and the penalty's killed me at tax time. 
I've looked at all the math, and i know how stupid i am and what a bad person i am for letting my family get to this point. but we had some really tough breaks, all having to do with housing market crash and a failed septic on a new house that drove us to borrow huge amounts just to live.

Ok, done whining.....so i can take money prior to 59 1/2 if i take equal payments for 5 years...the money in a long ago paid 401(K) would REALLY come in handy right now, not at 59 1/2, when it will be too late and we will have already moved into our cardboard box.

thoughts?


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## gouge_away (Apr 7, 2015)

Go get yourself a new car under $24k. Sell all your crap, buy new crap, and file Chapter 7.


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## Thor (Oct 31, 2011)

Get on the Dave Ramsey plan.


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## kristin2349 (Sep 12, 2013)

You realize you'll still have taxes and penalties due on any early 401k withdrawals right?

If it is the only way out of the mess you are in then you have to do what you have to do. Just make sure to have taxes and the 10% penalty taken out.


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## whatslovegottodowithit? (Jan 6, 2013)

I'm confused as SEPP programs are not permitted under sponsored plans? 

Source: Substantially Equal Periodic Payment (SEPP) Definition | Investopedia

Also, the IRS says: 

Is there an exception to the tax for distributions in substantially equal periodic payments?

Yes. If distributions are made as part of a series of substantially equal periodic payments over your life expectancy or the life expectancies of you and your designated beneficiary, the §72(t) tax does not apply. If these distributions are from a qualified plan, not an IRA, you must separate from service with the employer maintaining the plan before the payments begin for this exception to apply. If the series of substantially equal periodic payments is subsequently modified (other than by reason of death or disability) within 5 years of the date of the first payment, or, if later, age 59½, the exception to the 10% tax does not apply. In that case, your tax for the modification year is increased by the amount that would have been imposed (but for the exception), plus interest for the deferral period.

Source: http://www.irs.gov/Retirement-Plans...rding-Substantially-Equal-Periodic-Payments#2


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## whatslovegottodowithit? (Jan 6, 2013)

Is a HARP/Re-Fi out of the question? What options do you have with the house? Your primary house, your 2nd vacation home, or rental properties? I'd say try and work with the lender(s) if you can. Be prepared to show them a budget, bank statements, etc... to prove you are in poor financial shape.

Can you quit your job and easily seek comparable employment with comparable pay? This could work if you are eligible to collect a pension based on service time. If you leave your current job now, can you take the pension as a lump sum? Would it be enough to cover the mess you're in? Otherwise, if you have to go bankrupt, leave the 401(k) alone if the assets are substantial.


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## Gseries (Jan 6, 2013)

My pension comes from previous job, the 401k (tsp) is there. I can't borrow against it unless I move it to my new job, which sounds complicated. SEPP seems improbable due to actuary tables? Not enough equity in house. Anything I could think of the sell needs repair, thus money. My wife doesn't get it, so hard to explain.


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## gouge_away (Apr 7, 2015)

What state, sometimes you can choose between state or federal exemption tables, if your wife files with you double up on exemptions in chapter 7.

By doubling up, you protect your wife as well, in Wisconsin you can file together and double the primary house hold, that's $150k worth of property, and another $25k in personal property, and keep 2 vehicles under 20k each.


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## Thor (Oct 31, 2011)

I would avoid raiding the 401K unless it literally would mean you move into the cardboard box under a bridge. Your 401K is protected in a bankruptcy! Your 401K cannot be taken by creditors. Don't lose it by taking money out to pay debts or expenses!

First, write down a basic budget of your income and your current spending. Write down a list of all your debts from smallest to largest. Get this on paper in a legible organized way so that you can see it.

Now consider selling stuff. Even if it doesn't work right, it can still be sold for something. If it isn't working, it doesn't do you any good to keep it. If you can get help from friends or church members, etc, who can perhaps sell you parts at cost and help you fix it for free, it may be worth putting money into repairs before selling. But generally I think it is a losing proposition to pay for repairs just to sell something.

Consider if there is a way to increase your income.

As I understand it, you have to keep paying your mortgage because otherwise you will be foreclosed upon. But all your other debt payments are optional. The worst they can do is repossess a car or report you to credit bureaus as being in default on a loan. So I would make sure to make the mortgage payment first.

At this point, considering the above, are you able to make your mortgage payment plus feed the family? If not, how much more income does it take to cover it? Is there a way to generate that income via a 2nd job?

If not, you are probably going to have to move to a cheaper home, and probably something you rent rather than buy.

As I suggested before, you need to get on the Dave Ramsey program. Your local library probably has some of his books, which you can thus read for free. Getting out of your financial mess is not going to be easy. Avoid going to a credit counseling service because that will hurt your credit rating. If you belong to a church, talk to someone there to see what kind of help you can get through them.

Don't raid that 401K!!!


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## Gseries (Jan 6, 2013)

It seems an unsolvable problem :-(
Even seeking professional help is a bad idea?
How do I ask at church, seems an awkward conversation starter.


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## coffee4me (Feb 6, 2013)

Gseries said:


> I can't borrow against it unless I move it to my new job, which sounds complicated.


This usually takes 2 phone calls.


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## gouge_away (Apr 7, 2015)

Gseries said:


> It seems an unsolvable problem :-(
> Even seeking professional help is a bad idea?
> How do I ask at church, seems an awkward conversation starter.


You can find financial assistance offices, Trinity Debt Solutions, and Leaven, are a couple that come to mind.


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## Thor (Oct 31, 2011)

Gseries said:


> It seems an unsolvable problem :-(
> Even seeking professional help is a bad idea?
> How do I ask at church, seems an awkward conversation starter.


It is not un-solvable if you keep an open mind. I remember getting laid off from work and not being able to come up with any ideas. Something about the stress of the situation making it hard to think.

It sounds like you do have a church you attend. I would approach either your pastor or your deacon. That is what they are there for. They will know who to put you in contact with who can help you with putting together a recovery plan, and probably people who can help you get it rolling.

If you have broken stuff like a lawn mower, bicycle, car, etc, there are probably people at church who can help you fix it cheap and sell it. Your deacon and pastor will help you get connected. My wife is a deacon at her church and she deals with these kinds of things. It is what a deacon does.


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## Gseries (Jan 6, 2013)

I appreciate that. Its the embarrassment that I can't cope with. Its an emotion for which I have no defense. BTW we are new at our church, just moved. Is it poor form to show up and ask for help?


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## Thor (Oct 31, 2011)

Gseries said:


> I appreciate that. Its the embarrassment that I can't cope with. Its an emotion for which I have no defense. BTW we are new at our church, just moved. Is it poor form to show up and ask for help?


Nope.


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