Roll It, Don't Receive It!

Dear Dave, I got laid off the other day. The fact that I had 10 months of expenses in my emergency fund made this a little less painful, but just before that happened I made a knee-jerk decision to cash out a 401(k) to pay off $26,000 in credit card bills. The money is in transit right now. Is there any way to stop this? Mike Dear Mike, That was a really bad decision. I'm glad you've realized that, but now you've got to jump into damage control mode fast! First, see if you can cancel the transaction. If it's too late for that, do a direct transfer as soon as the money arrives and roll it over into an IRA. This will prevent you from getting absolutely killed on taxes. If you don't take care of this, you're going to get slapped with a 10 percent penalty, plus your tax rate. The government's going to hit you for 40 cents on the dollar. You really don't want to let this happen! - Dave
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