More of your financial questions are being answered. Here is another installment of Ask Ash’Cash, this time with him addressing using money in your 401k.
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)
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A: Hey Aliyah, thanks for reaching out.
First, congratulations on the upcoming new additions to your family.
There are sever 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.
If you have any financial questions for Mr. Cash, please email him at AskAshCash@FreesWorld.com.
Previously: Ask Ash’Cash – Q: How Do I Raise Money To Start My Business?
