Current Events > Taking money out of my 401k for a car yay or nay?

(+) Yeah! (+)

My current car is on its way out. 2003 Camry with 270k miles on it. Still runs fine but I want to be financially prepared when it inevitably becomes not worth it to repair (haven't done any major repairs yet sans maintenance)


I've been working part time as an EMT for 2 years and have accrued about $1500 in my 401k. Was thinking about taking out that money when the time comes to add to my current savings with a down payment on a new/used car. Seems like a worthy investment considering A) This is not my career, just wanted to be involved in the medical field while I finish school and B) $1500 is not going to make or break my retirement right lol.

Of course I know they take like 10% when you withdraw which is dumb but whatever.

Of course I imagine this beast of a car may even last 300k+ so thats even more more money that will be added to my 401k/savings in the time being.

no. just stop contributing to the 401k while you build up some money to buy a new car.

That is a terrible idea on so many levels.

googs19 posted...

That is a terrible idea on so many levels.

how come tho

Nnnnnno!
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It's not worth it. Don't think of it is "X dollars being removed today" but more "X dollars + 30 years of interest removed today" because what you take out now won't grow to be more later.
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I'm 22, I have a whole entire 40+ years to add to my 401k. This latest check barely added $20.

Terrible idea. The fact that you have a 401k at 22 is great, do not touch it.
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dawiseone4 posted...

I'm 22, I have a whole entire 40+ years to add to my 401k. This latest check barely added $20.

I mean.. it's your money, you can do with it what you want, but you asked if it was a good idea, and the overwhelming consensus is that it's a terrible idea. Do with that knowledge what you will.
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dawiseone4 posted...

I'm 22, I have a whole entire 40+ years to add to my 401k. This latest check barely added $20.

At 5% interest over 40 years you would be losing over $7,000.

Also, taking money out of your 401k sets a bad prescient. Once you take the money out the first time you are more likely to do it again.

I don't recommend it
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A car is not an investment. Investments appreciate in value...like your 401k. If you need a car buy a cheap one in cash you've saved. If you need to stop contributing to the 401k.

If you can afford a car payment then buy a car dirt cheap. Pay yourself the car payment amount you would theoretically be paying monthly. Trade in the car at the end of a year with the money you've saved for a slightly better car. Wash rinse, repeat.
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With 6% after inflation $1500 becomes $15000 and change in 40 years. With a5 year loan $1500 extra down payment only cuts $25 a month off your loan.

I wouldn't do it.
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Don't take any money out except for the most extreme of emergencies. Just tough it out with the current car a little longer and get a car loan for a newer one if you have to. That would be preferable to taking the $ out.
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Terrible idea for all the aforementioned reasons.
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