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Ask Ash'Cash: Q: Should I Use My 401K?

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Q: Hi Ash Cash,

I would love to get your opinion about a financial situation. My

husband and I are both working and we have a 15 month old and a set of

twins due in April. I have been working for sometime but started

saving late in my 401k. I probably have about $10,000 in the 401k.

After the twins I am planning on becoming a stay at home mom because

it does not make sense to pay someone so much for daycare. I would

like to know should I pull the money out of the 401k because I am

losing money anyway and if so what should I invest it in. I am not

sure if I ever want to go back into the workforce as in a 9-5 but I

would like to eventually work from home and continue putting money

away for when I get older. If you can please give me some advice.

-Aliyah T (Charlotte, NC)

A: Hey Aliyah, Thanks for reaching out. First, congratulations on the

upcoming new additions to your family. There are several moving parts

to your question so before I answer each I would say to sit with your

husband and create a budget together to see if you can afford to stay

home. I know you mentioned that it wouldn’t make sense to pay someone

so much for daycare but it’s all relative. I can’t imagine daycare

costing as much as your take home pay from a 9-5 job so even if the

daycare is costly think about the money you are losing out by not

working at all. If your husband’s income can support the household, I

would say to begin to work on figuring out how you can make some

additional income working from home. I do not suggest taking the money

out from your 401K (Retirement account) only because withdrawing it

will make it taxable income plus the 10% penalty for withdrawing prior

to 59 1/2 so you will be losing money. If it’s in an investment that

is not performing well then I suggest that you sit with a financial

adviser and move it to something either more diverse or more

conservative. If it’s a situation where the money in the 401k is

needed to sustain the household until you get back on your feet then I

would say to make sure that it’s the last resort not the first option.

Look at your budget and see what expenses can be cut temporarily

before you decide to withdraw from the retirement account.

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