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.
