"Once you withdraw from your 401(k) early, taxes (24 percent federal, plus applicable state taxes) and the 10 percent early-withdrawal penalty will take a big chunk of that $80,000. Your remaining funds-about $50,000-might still take you far, but also might go faster than you think."
"And when that money is gone, you're not just starting over-you're starting over with zero savings, a gap in your work history, and maybe even the same burnout. That said, your friend is exaggerating a bit when they say you're 'throwing your future away.' People rebuild careers and retirement savings in their 40s and 50s all the time."
"There's a good chance you're downplaying the risks because you're desperate for relief. There's the opportunity cost of pulling out your retirement, too. Just to put things in perspective, $80,000 at age 42, left invested until around age 67, might real[ize significant growth]."
A 42-year-old experiencing severe job burnout proposes withdrawing their entire $80,000 401(k) to travel Southeast Asia for several months. After taxes and a 10 percent early-withdrawal penalty, approximately $50,000 would remain. While traveling cheaply in Southeast Asia is feasible, the financial consequences are substantial. The withdrawal eliminates retirement savings, creates employment gaps, and may not resolve underlying burnout. Career rebuilding in one's 40s and 50s is possible but challenging. The opportunity cost of leaving $80,000 uninvested until retirement age 67 is significant. The person's desperation for relief may be clouding judgment about actual risks and long-term consequences.
#early-401k-withdrawal #job-burnout #retirement-planning #financial-decision-making #career-transitions
Read at Slate Magazine
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