'Desperately behind': Caleb Hammer slams 27-year-old for cashing out 401(k) twice for home down payment — says she lost 'the best decade' of her life

“Multiple times. Why!?” Hammer shot back.

Hammer told her exactly where that left her. “You’re desperately behind on retirement for the second half of your 20s,” he told her. “And you’ve lost the best decade of your life for compound growth. That’s beyond disappointing.”

Hammer, 31, hosts Financial Audit out of Austin, Texas, where he combs through guests’ budgets and bank statements for more than 3 million YouTube subscribers. Most weeks that means high credit card balances or side hustles gone wrong, but back-to-back 401(k) cash-outs was an unexpected twist that Hammer had a lot to say about.

The tax rule she got backwards

Her explanation didn’t help her case. “People have told me you can just take it out,” she said.

“Well, yes, of course you can, with penalties and taxes,” Hammer said. “There’s a lot of things you can do. You can go murder someone right now, there will still be consequences.”

She told Hammer she regrets the withdrawals now, but here’s the problem: Pull money out of a 401(k) before age 59 1⁄2, and the IRS generally adds a 10% penalty on top of ordinary income tax. Buying a first home doesn’t get you off the hook, and neither does taking the money as a hardship withdrawal.

Hammer figured she likely paid that penalty, and he wanted to know why money she planned to spend on a house was sitting in a retirement account in the first place.

Thousands of Americans do the same thing

About 41.4% of workers who left jobs between 2014 and 2016 withdrew at least a portion of their 401(k) savings, according to a study of 162,360 employees published in Harvard Business Review — and 85% of that group emptied their accounts entirely.