Charlotte man says ex wants him to cash out his 401(k) for a home, but Ramsey Show says she’s ‘full of crap’

Core Viewpoint - The discussion centers around the risks and consequences of cashing out a 401(k) to invest in real estate, emphasizing that this strategy is generally poor financial planning due to penalties, taxes, and loss of compound growth potential [2][5][6]. Group 1: Financial Risks - Cashing out a 401(k) incurs heavy penalties, including a 10% penalty and a tax rate of approximately 25%, which significantly reduces any potential profit from real estate investments [5][6]. - The example of Ryan's ex-wife illustrates that despite making a profit from a property sale, the costs associated with withdrawing from her 401(k) negated any financial gain [5][6]. Group 2: Retirement Savings Context - Ryan's retirement savings are notably low, with only $85,000 in his 401(k) despite an annual income of $130,000, which is significantly below the average savings target for his age group [4]. - The average 401(k) balance for individuals aged 50 is reported to be $313,220, indicating that Ryan is well behind this benchmark [4].