The 401(k) savings are meant for retirement. The idea is to save and invest money for retirement, not spend it on frivolous things.
So, when a family member asks you to withdraw money from your 401(k) savings, you will be shocked. When a young man got a call from her sister asking to borrow from her 401(k) account, he refused. He asked the forum, “Am I wrong for not taking money out of my 401k for my sister?”
Here’s her story.
WHAT YOU NEED TO KNOW
The original poster (25, M) received a call from his sister (27, F) one day. She asked the original poster (OP) to withdraw money from his 401(k). “She said it with such ease that I thought it was something easy like getting her something to eat or whatever,” says OP.
OP’S SISTER’S BACKSTORY
OP’s sister has three kids, a 9-year-old son, a 3-year-old daughter, and a 7-month-old son. The father of the first two children was a drug addict and passed away from an OD.
“Honestly, I understood my sister’s grief, but was ultimately relieved she didn’t have him in her life,” says OP.
THE SISTER FELL FOR A NEW GUY
When the father of OP’s sister’s kids passed, her current ‘fiancé’ decided to swoop in. OP’s sister was still grieving her partner.
“Since she already had some emotional and mental damage from before the first relationship, I could see why she easily fell for this new guy,” says OP.
THE NEW GUY IN OP’S SISTER’S LIFE GHOSTED HER
OP’s sister and her fiancé lived together for a few months. When she got pregnant, he moved to Mexico ‘to get clean.’ He then denied being the father of this child and ghosted OP’s sister (with many more stories involved). He recently got into the picture again.
WHY DOES OP’S SISTER NEED THE MONEY?
Before her ‘fiancé’ got into the picture again, OP’s sister threw a huge party that followed our Mexican traditions for her kids. These parties can cost a lot of money.
She also decided she was going to Mexico to visit said man so that he could meet his son.
“She asked me to get money out of my 401k, as she knows I wouldn’t have the amount she needs saved up. I told her I would think about it,” says OP.
OP HAS ALSO BORROWED MONEY FROM HIS SISTER IN THE PAST
“She had lent me a large sum of money during college years when I got in a rough patch with my serving job, but I’ve already paid her back,” explains OP.
WHY DID OP SAY NO?
“I have a decent-paying job for my age, and I’ve never said no to lending anyone anything, including money. But, I’m not a pushover either, so most people wouldn’t think about asking me,” says OP.
“I don’t think it’s appropriate for me to take out any money from my 401(k) to lend to my sister for a party and for her to visit her fiancé,” he explains.
“Am I wrong for saying no,” asks OP.
Here’s what people said.
YOU WILL HAVE TO PAY A PENALTY
“You pay state and federal tax plus a 26 percent penalty!
They don’t take the money out of what you withdraw; it must be parked on your income taxes next year.
Do not do it. This is not life and death! They will put you under a financial burden.
Most 401(k) work differently than this, significantly if your employer contributes. If they do, you must work for them for 5-10 years, depending on the company. I doubt you would be allowed.”
THIS IS NOT AN EMERGENCY
“Do not do it. There is a hefty tax penalty. It would be different if there were an emergency. This is not one of those times.”
DON’T ENABLE THESE CHOICES
“Plus, this requested money isn’t for life-saving medical treatment! It’s for a kids’ party and a trip to see a deadbeat dad. Please don’t enable these choices.”
DON’T USE YOUR 401(K) FOR YOUR SISTER’S VACATION
“Not wrong. Your 401(k) is different from a typical account. You can be charged heavy fees and taxes for withdrawals like that. If the guy wanted to meet his kid, he should be paying anyway. Your 401k shouldn’t be used for your sister’s vacation to see that deadbeat.”
DON’T GIVE THE MONEY
If you have already paid her back, don’t give the money.
YOUR SISTER’S BAD CHOICES ARE NOT YOUR PROBLEM
“Not wrong. Please don’t do this. This is your retirement, and you’ll get penalized for taking that money out. Your sister made her bed so now she can lie in it. Her bad choices should not be your problem.”
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Chhavi
Chhavi Agarwal is a lawyer who quit her job to become a full-time work-from-home blogger. She shares tips and tricks on making money online, side hustles, freelancing, and blogging through her blog, Mrs. Daaku Studio. She has been featured on Forbes, Business Insider, Peru Tribune, Kentucky Today and More. Byline: MSN, AP Wire, Newsbreak