Be sure to send you questions in early or read the archives later.
Starting next week, I will be the financial contributor for the new ABC show “The Revolution.” I’ll still be a full-time columnist for The Washington Post, but as a result of my work on the show, I will no longer be doing my regularly scheduled video or text chats. I will, however, continue to do my monthly text chats to discuss the pick for the Color of Money Book Club, and occasionally I’ll host a live discussion when there’s a hot personal finance issue.
Don’t Touch Your 401(k)
“I graduated in May with a Master’s Degree, but I am currently unable to find full time work in my field,” noted the reader. “Soon I will be on the hook for my first student loan payment of $628 a month and I will have 10 years of payments. Because I am only working part time, I will not be able to cover that payment along with my other living expenses. Should I cash out my 401(k) from a former job? It is worth about $46,000 right now, and that would almost cover all of my student loans.”
No. No. No. That’s what Kantrowitz said -- and what I would say.
In addition to raiding your retirement savings, you’ll be hit with at 10 percent penalty and have to pay income taxes if you’re not 59 ½ years old, Kantrowitz says.
Kantrowitz offers some alternatives to cashing out of your retirement account, including applying for an economic hardship deferment that suspends your repayment obligation temporarily, though the interest will continue to build during the hiatus.
The American Dream
We keep tossing around this term, “The American Dream,” but what does that really mean?
The Washington Post’s Outlook section’s “Five Myths” feature recently challenged what we think we know about the American Dream.
“Few ideas are as central to American self-identity as the ‘American Dream,’” writes Michael F. Ford, founding director of Xavier University’s Center for the Study of the American Dream. “Politicians invoke it, immigrants pursue it, and despite unremittingly negative economic news, citizens embrace it. But what is the American dream?”
Well, here are some of the things it’s not, Ford said:
-- It’s not about being rich. A recent survey by the Xavier Center found that only 6 percent of Americans ranked “wealth” as their first or second definition of the American dream. “A fat bank account can be a means to these ends, but only a small minority believes that money is a worthy end in itself,” Ford writes.
-- It’s not just about homeownership. A New York Times-CBS News poll found only 7 percent of Americans surveyed ranked homeownership as their first or second definition of the American dream. “Homeownership is more important to special interests than it is to most Americans, who, according to our research, care more about ‘a good job,’ ‘the pursuit of happiness’ and ‘freedom,’” Ford said.