Spokane man surprised by $140K tax bill after he withdrew cash from 401(k) — what Ramsey Show hosts say to do

0
1KB

Spokane man surprised by $140K tax bill after he withdrew cash from 401(k) — what Ramsey Show hosts say to do

Jessica Wong

5 min read

Marty from Spokane, Washington, thought he was taking a smart step toward debt-free homeownership. But pulling $400,000 from his 401(k) to buy a house left him with a staggering $140,000 tax bill.

“I just recently found out that when I go to file my taxes, I am going to owe roughly $140,000,” he said, calling into The Ramsey Show. “I really don't want to do a payment plan with the IRS, but I just don't know the best path forward.”

Marty thought he had paid all the fees and taxes when he withdrew the money, but said, “I was misinformed that it had been paid… and I didn’t realize it hadn’t been done until I went to file my taxes.”

Marty has a few ways to come up with the money: He could use a line of credit like a HELOC or credit card, dip into his $60,000 in savings, or take out a personal loan from a bank. But The Ramsey Show co-hosts Jade Warshaw and Rachel Cruze were clear: some of those options could make things worse. They advised against using a home equity line of credit (HELOC) or a credit card.

“I would not do a HELOC,” Cruze said. “I would not put your home at risk. With HELOCs, the interest rates are sometimes insane.” As for credit cards, the interest rates tend to be even higher and more volatile, and the debt can spiral fast. That’s a dangerous mix when dealing with a large IRS bill. Instead, Warshaw and Cruze recommended pulling from Marty’s savings and using a personal loan from a bank to cover the remainder.

“Use your savings, then get a personal loan to pay the IRS off as quickly as possible,” Warshaw advised.

“Because I’d rather owe a bank than the IRS at this point,” Cruze added.

IRS debt can lead to aggressive penalties, interest and long wait times when trying to resolve issues — which is why they emphasized handling it quickly, cleanly, and without risking other key assets like retirement accounts or home equity.

“You’re already in the hole,” Cruze said, adding “...be in the hole with a bank.”

Marty’s story serves as a reminder to avoid dipping into retirement accounts, especially if you don’t fully understand the tax implications.

As Warshaw concluded, “No more leveraging very important things for debt.”


Rechercher
Catégories
Lire la suite
News
UFC legend B.J. Penn arrested for 4th time in 3 weeks amid imposter family saga
UFC legend B.J. Penn arrested for 4th time in 3 weeks amid imposter family sagaB.J. Penn's legal...
Par Mystic Queen 2025-06-15 08:53:04 0 1KB
News
I Asked ChatGPT the Best SUVs To Buy in 2025 — Here’s What It Said
I Asked ChatGPT the Best SUVs To Buy in 2025 — Here’s What It SaidAs artificial intelligence...
Par Mystic Queen 2025-06-15 05:00:08 0 1KB
News
Up 17% in 2025, Is It Time to Buy This Soaring Growth Stock and Hold for the Long Term?
Up 17% in 2025, Is It Time to Buy This Soaring Growth Stock and Hold for the Long Term?...
Par Mystic Queen 2025-06-14 05:00:12 0 1KB
Religion
Unlocking Hidden Messages: Exploring the Spiritual Meaning of Ailments
Unlocking Hidden Messages: Exploring the Spiritual Meaning of AilmentsAre you curious about the...
Par Mystic Queen 2025-06-12 05:00:25 0 1KB
News
Nintendo Switch 2 Stock Tracker: Restocks Are Selling Out Fast. Here's Your Best Option Right Now
Nintendo Switch 2 Stock Tracker: Restocks Are Selling Out Fast. Here's Your Best Option Right...
Par Mystic Queen 2025-06-15 08:40:59 0 1KB
AtoZ Buzz! Take Control of the narrative https://atozbuzz.com