What is the penalty for cashing in stocks as opposed to rolling them over to a retirement account?
Question:
Answer:
That depends. It sounds like the stock were part of your compensation and you probably did not pay income tax on these earnings.
If you cash it our you will end up paying income tax on the funds plus possibly a penalty (amount depends on type of program).
This may be better than the loans you have however it may not be as you will likely need this plus much more in your retirement account. Do the math on both options and possibly contact the fund management company and talk to the manager. I hate debt however paying tax + penalty may be worst.
In most cases using the money, which is essentially a winfall to pay off bills that you spent months or years causing will not help you in the long run. you have to suffer to pay off your bills. If you do not suffer, you will not learn the lesson. I assume you mean loans and credit card bills. These are the worst.
In most cases you never want to take money out of a retirement account, even for the specified acceptable reasons that the IRS state. The reason is that since you are not a forward think future oriented person by nature, you will not rebuild the account.
also, you do not want to pay one more cent in tax than you have to. Penalties are the biggest rip off of all time.
Roll over the money to a retirement investment account, T. Rowe or Morgan Stanley or something then crack down on your budget and get you debts paid off. This includes cars and homes. Never pay the minimum, pay every last cent you have to clear your debts or you will end up paying multiple times for each item you charged. How does it feel to pay 65 for a $20 meal at Chili's not good right... Think about the future... Social Security is not going to take care of you... Check out the link and listen to the podcast.
More Questions & Answers...