401k
401k Information

Cash Out 401k

401k CODA-Cash or Deferred Arrangement Plan

There are many ways you can begin saving for retirement. One of the more popular options is a 401k plan that is offered by your employer. These plans are sometimes referred to as CODA, or a cash or deferred arrangement plan. The plan allows an employee to make contributions from their pay. These contributions can then be matched by the employer. Many companies offer 401k plans to workers as a way to help save for retirement.

A 401k plan has many advantages. One of the main advantages is that it allows you to make contributions from your pay check before any taxes are taken out. These pre-tax funds that are contributed to the plan are not taxable until you begin to make withdrawals. This usually creates a debate about which is the best IRA: Roth vs traditional IRA. An even better retirement plan for the wealthy making more than 6,000, the Roth on Roids™ is the best because of the lack of restrictions and the phenomenal benefits.

Most companies will match contributions up to a certain amount. Typically, a company will match up to 50%, but there are companies that will match 100%. In some cases, employees may have the option of a profit sharing plan. This is when payments can be made by the employer and are linked to the profit sharing plan. While this is an available option in some companies, most 401k plans are participant-directed.

Most 401k plans will allow the employee to make investment decisions. They will be able to choose where the money is invested. The choices include stocks, mutual funds and bonds. It is possible to invest in a combination of all three. Other investment choices could include investing in your company and owning some of the company stock.

All retirement plans, including 401k plans, are regulated by The Employment Benefits Security Administration, which is part of the Department of Labor. Individuals who work for the state government will not have the option of a 401k. They have other types of retirement plans that are available. Other companies that are tax exempt or private may offer a 401k plan, as long as qualifications are met.

More 401k Plan Facts

There are many benefits of a 401k. First and foremost is the control that the employee has. They can choose how much they wish to contribute and exactly how the money is to be invested. Changes can be made at any time. If you do not like your current investment choices, you can choose to invest in other companies, funds or bonds. You can also adjust your contributions by notifying your employer.

Funds may be withdrawn from a 401k plan, but this is not advised until you reach retirement age. If you do withdraw early, you will have to pay taxes on the entire amount in the account and you will also incur a penalty for removing the money early. However, there is an option that allows for withdrawals due to hardships. In this case, you may not have to pay the penalty.

401k plans do have rollover options. Before making the choice to use 401k plan rollovers to IRA, make sure to do the required research so you know exactly what will be happening to your savings. 401k plans are designed to help you save for retirement. It is always best to leave the money in the plan for as long as possible, especially if you are working for a company that will match your contribution.

Frequently Asked Questions

  1. QUESTION:
    How long to recieve a 401k cash out check?
    I recently switched companies & I am cashing out my 401k. Its done, so I don’t want to hear about it being a bad decision. I am just curoius how long to expect to wait for the check. Can it be direct depoited? Would that speed it up? Does anyone have experience with this?

    • ANSWER:
      It usually comes in the form of a check within a couple weeks. If you change your mind, you can still roll the funds into a 401k without penalty if you directly deposit the check.

  2. QUESTION:
    401K cash out after termination – is there a penalty fee?
    Thank you all who have answered my previous question regarding cashing out on my 401K. My next question is: I am no longer employed with the company that I have worked with and is looking to cash out on my 401K instead of rolling it over. Will there be a 10% penalty fee even if I am no longer employed with the company?

    • ANSWER:
      Oh yeah!!! That penalty is on top of the taxes

  3. QUESTION:
    how much tax do you pay on a 401k cash out?
    my ex wife currently cashed out her 401k as part of a settlement for our divorce. my portion came to 29000. i have been out of work for the past year so this is basically my only income. i live in wisconsin and was wondering if any number crunchers can figure out what the tax will be on this, and what i will be left with. thank you very much for your time.

    • ANSWER:
      If the distribution is structured correctly there is no 10% early withdrawal penalty for QDRO distributions. So, if the plan followed the rules and the distribution was actually YOURS and not your ex-wifes then only the tax portion is applicable and your withholding should have covered it and you’ll likely get a refund of the 20% withholding they took.

  4. QUESTION:
    In Wisconsin, does 401k cash out affect unemployment benefits?
    In Wisconsin. If you receive a cash payment of a 401k, before applying for unemployment Will it affect your unemployment benefits? I have heard that it affects benefits if you receive it while getting unemployment.

    • ANSWER:
      It shouldn’t since it’s not income.

      If you do take a cash out, you get hit with a 10% penalty for early withdrawal and pay income taxes. They will withhold 30% to 40% depending on state income tax.

  5. QUESTION:
    Is it a bad idea to cash out 401k now?
    Is it a bad time to cash out 401k? It has went down 00 in one month, I can’t afford to lose any more, I need it to survive on.
    This 401k is my share during marriage in the divorce settlement.

    • ANSWER:
      We’ve just gone through a wave of panic selling, but I think the consensus is we’re in a “Bear Market”. Usually a panic sale is followed by folks picking up bargains, restoring prices to more reasonable levels. You might give it a week or two at least, before repositioning your money.

      You shouldn’t need to cash out your 401K to protect it. You can hopefully re-allocate your investments out of mutual funds and into a fixed investment like a money market.

      Here’s the bad side of that – you make or lose money when you sell your positions in an investment. So selling now will “lock in ” losses. The question we all have to ask is where’s the bottom? Are we there yet? In my experience we aren’t at the bottom until EVERYBODY has jumped out of the market and no one wants to get back in.

      Here’s the good side – If you reallocate now, you will make guaranteed returns, maybe not big ones, but returns none the less.

      Going forward, don’t invest more in your 401K than your company matches. Know that there are other places besides mutual funds where you can put your money and protect the downside. Take a look at IRA indexed annuities – not the variable ones. Some will pay you bonuses just for investing with them and let you make double digit returns when the market is good, but no losses when the market is bad. Also, there is no cost to set them up, just a committment to leave them in the account for a prescribed period of time.

  6. QUESTION:
    Is Turbo Tax able to figure early cash out 401K taxes?
    So I cashed out a 401K and want to use Turbo Tax. Can it figure the taxes and put everything on the right line?

    • ANSWER:
      Not a problem.

  7. QUESTION:
    How Long To Get My 401K Cash-Out?
    I quit this job 2 years ago and now I am rolling over part of my 401K to an IRA and then cashing out the rest to pay off some high-interest debt, which my financial adviser said was a good idea considering the interest rate I’m paying on this debt.

    I sent in the notarized paperwork 2 weeks ago and have still not seen the cash deposited to my account (I did direct deposit). How much longer will this take?

    • ANSWER:

  8. QUESTION:
    My mom want cash out 401K how can she do it?
    my mom 63 and she want to cash out the 401K how can she do it and what is requirement?

    • ANSWER:
      Many plans don’t allow you to cash out if you’re still working for the company. If she is, she should borrow the money from her 401k instead.

      If she’s not still with the company, she should contact the custodian (T Rowe Price, Fidelity, whoever sends her quarterly statements) and ask for a form to close it out.

      If she takes the money directly, she will have to pay income tax on it in the year she receives it unless she rolls it into an IRA within 60 days of receiving the money. The company will also withhold 20% for income taxes (they are making an estimated payment on your behalf).

      If she wants to leave it invested, she should open a new IRA somewhere and do a “trustee to trustee” transfer. That way no taxes will be withheld.

  9. QUESTION:
    If you are terminated from a company and opt to cash out 401k do you get the whole or just what you put in?
    My job was terminated and they gave me the opt to cash out my 401k I have a certain amount in there with the contributions from the company and then I have an amount without the contributions from the company. If I cash it out which amount do I receive so I will know what the penalties will be?

    • ANSWER:
      It depends how long you worked at the company. Usually you have to work there for several years before you become “vested”, meaning you get to keep THEIR contributions to your account. You are always fully vested for YOUR contributions, but you have to stay with the company a set number of years before you get vested for their amount. It should be clearly stated in the paperwork they give you – if not just ask, they have to tell you.

      However, cashing out would be a really stupid idea, and you don’t have to do it. By cashing out, you face stiff penalties and fees that will eat up a lot of the money (like 40% of it) that you worked so hard to save. This money is supposed to be for your retirement, so the government does everything they can to discourage you from accessing it before then.
      The far better option is to simply have it “roll over” to a 401k account at your new job, or to an IRA at a bank or financial institution. Or you can keep it in this current 401k account – the money is always yours and the company can never touch it, and they don’t need to close the account. It’s just easier for you to keep track of if you roll it over.

      Cashing out would be financially robbing yourself. Don’t do it.

  10. QUESTION:
    Cash out 401k or roll it over please HELP?
    My prev. employer sent me a letter regarding my 401k with them stating they will send me a check for the amount if i choose not to roll it over to an ira. I have about 800.00 or less in there and for this year income I will be making about 30,000.00. Should I just cash it out or open an ira to roll it over.

    • ANSWER:

  11. QUESTION:
    if i cash out 401k does this count as earned income or retirement benefits for unemployment?
    it’s over 9 weeks and my unemployment just been approved, but 5 weeks into my joblessness i cashed out small 401k. Do i need to claim this money to unemployment as earned income i don’t want to break any rules and my local unemployment office never answers the phone

    • ANSWER:
      I don’t think that this will effect your unemployment, it will be taxed as income and you will have a 10% penalty also on this money.

  12. QUESTION:
    Is it a smart idea to cash out my 401k or should I borrow from it?
    I am quitting my job because my boss hates me. I am going to take about a month off and fine a job. I need money to hold me off during that transition. Should I borrow from my 401k or cash it out? And if the answer is borrow, can I do that after I quit?

    • ANSWER:
      A 401k is long term investment for retirement. It is always a bad idea to cash out a 401k. Not only do you have to pay income taxes on the withdrawl, but you have to pay a 10% early withdrawl penalty. In other words, they take about 30%.

      Since you plan on quitting, you can’t borrow. At termination of employment, all loans must be paid in full or they are treated as a disbursement.

      Look for a new job. Then turn in your notice. Never burn bridges. You might need a job reference. When you get your new job, rollover that 401k into an IRA. When you get into your 60s, you’ll be very glad you have that money stashed away.

  13. QUESTION:
    Can you put your own cash into 401K’s (not coming out of your paycheck)?
    Can you put your own cash into 401K’s (not coming out of your paycheck)?
    The 401K is with Merrill Lynch, my company that I work for is not Merrill Lynch though.

    • ANSWER:
      No…a 401k can only be funded via payroll deduction. The only exception to that is a rollover…and that would have to come from an IRA. So, the workaround is to put money into an IRA and then roll it into the 401k. You’re limited to 4k if you go this route…..easier way would be to simply change your 401k deduction to 100% and then live off the cash. IE if you wanted to put in 10k of cash and you make 5k a month…change your deferral percentage to 100% for 2 months. Does the exact same thing as you want to do.

  14. QUESTION:
    can you cash out a 401k for home improvements?
    We need to build a new deck. We do not want to get a second mortgage. The 401k has about 6000.00 in it. Its from a job my husband left 6 years ago. It is also losing about 60.00 a month the last few months. I know you have to pay a 10% penalty and taxes on the money. But to cash it out do you have to tell them what you are going to use the money for?

    • ANSWER:
      They are going to ask what you what it for (I normally just tell them unexpected expenses), but yes you can. You know about the penalty and taxes, so no suprises for you there. If the market does not improve, and you decide to borrow from yourself instead of cash out, the interest you pay yourself might be more than your normal return!

  15. QUESTION:
    Is it better to cash out a 401k or borrow take out a student loan during a hard time?
    My husband lost his job and we don’t think he will get another job making as much money as he was. He has a 401k that we could cash out and pay off our debt. If we do that, we will be able to afford the necessities. Would it be better to take out a student loan t pay off this debt? Or cash in the 401k?

    • ANSWER:
      You can’t get a student loan for anything other than school, so that is out. And regardless of whether you are concerrned about having funds for your retirement or not, cashing out a 401k is a terrrible terrible idea – in addition to the fees and charges, that will immediately eat alot of the money, the total will be included as part of your income for the year, and you will be hit with a shocking tax bill when you file. So you will be adding to your debt, not reducing it, and owing the IRS is not a situation in which you want to find yourself. I suggest you not even consider this as an option and do what is necessary to earn the income you need, whether it is one job or two, .

  16. QUESTION:
    do I claim my 401k cash out on my ohio unemployment?
    I was told not to when I talked to the person handling the 401k from my job she was the account for the company

    • ANSWER:
      There is no connection between your 401(k) account and unemployment.

  17. QUESTION:
    I have about ,000 in credit card debt and about ,000 in a 401k. Should I cash the 401k out and pay cards?
    51 yrs old. Want to know which way would be better. Continue making minimum payments (plus a little more occasionally) or cash in my 401k and pay them off. Most crds are 11.99APRor lower.

    • ANSWER:

  18. QUESTION:
    When you cash out your 401k, do you get taxed during the cash out and then when you file taxes for that year?
    A friend of mine cashed out her small 401k from a job we shared. She had about 0 worth taken from her amount for penalties and taxes. Will she be penalized again when she files her taxes next year?

    • ANSWER:
      whatever they withheld should include the income tax that they were required to withhold, if they penalized her for taking distribution early according to their plan, that is something within the contract
      however, when you file your tax returns for the year, you will be penalized 10% on your 1040 and another % for the state(in Calif. it is 2 1/2%)
      the company does not collect these penalties

  19. QUESTION:
    Can you cash out your 401K tax free to pay medical bills?
    I have to have a ,000 surgery not covered by insurance. I’m thinking of cashing out my 401K and someone told me that you can do it tax free for medical bills. Is this true?
    I’m only 25 so it’s not like I can’t build back up my 401K…

    • ANSWER:
      Your source may be close to the truth, if your other income isn’t too high.

      Is the surgery deductible? Cosmetic surgery is not deductible. If you cash out your 401k for nondeductible medical expenses, you will pay income tax and a 10% penalty on the withdrawal.

      I assume that you will have a ,000 withdrawal for deductible medical expenses. To the extent that your medical expenses exceed 7.5% of your adjusted gross income, that amount of the withdrawal will not be subject to the 10% penalty. So the penalty in your example is .75% of your AGI. On a ,000 AGI, that is just 5. Not much penalty at all.

      The entire withdrawal figures into your AGI. But if you itemize (and you will with a medical bill this size), you will deduct your medical expenses which exceed 7.5% of your adjusted gross income. This can reduce most but not all of the tax on the withdrawal.

  20. QUESTION:
    401K cash out with penalties?
    I quit my job over a year ago and I requested for my 401K to be cashed out with penalties and taxes over 2 weeks ago. still havent received the check. HOW LONG DOES IT USUALLY TAKE FOR THE 401K CASH OUT TO BE RECEIVED?

    • ANSWER:
      can take a month, easy. call the trustee and ask about the status of your request.

  21. QUESTION:
    How much will I lose if I cash out my 401K?
    I’m 26 and I only have around 00 in my 401K. If I cash it out, how much will be taken out?

    • ANSWER:
      The trustee will withhold 20% right off the top but this is rarely enough to cover the entire tax bill.

      How much the total tax bill is depends on your other income what state you are in. Early 401k withdrawals are taxed as ordinary income plus a 10% penalty plus state taxes.

      Many people say goodbye to 40%+ of their 401k when they cash it out early.

  22. QUESTION:
    How can I Cash out my 401k?
    I’m already repaying a 401k loan but I have no other means to get any additional money.. I am about to get evicted from my apartment and I wanted to know if there is any way I can cash out some of my vested funds. Any suggestions?

    • ANSWER:
      Don’t withdraw the money in a lump sum- that’ll cost you penalties and taxes. Instead, talk to your HR person (or whoever handles the benefit plan) about a hardship withdrawal. This way, you won’t pay the 10% penalty. You’ll have to prove you are in trouble, but if it’s true, that shouldn’t be difficult.

      Good luck. :0)

  23. QUESTION:
    can husband take car,wipe out bank accounts, cash 401k and let home foreclose in va?

    • ANSWER:
      No, and he has left a paper trail that your lawyer can follow so you can get your share of the assets. Judges do not look favorably on weasel husbands that think that they can get away with this. Stand tall & be forceful. You can overcome anything if you have the desire.

  24. QUESTION:
    What penalties will I incur if i cash out my 401k?
    I was considering cashing out my 401k to go into business for myself. What penalties would i be facing?

    • ANSWER:
      What ever you take will be added to your ordinary income and taxed (by Fed, State and local) accordingly. On top of that, if you are less than 59 1/2, there is 10% mandatory penalty.

      Depending upon the dollar amount a good rule of thumb initially should be 40 – 45% in taxes and penalty.

  25. QUESTION:
    how do I avoid double taxation on my lump-sum 401k cash-out?
    cashed out earlier this year, gov took 27%. now, doing taxes, am I required to pay income tax on the remaining amount?

    • ANSWER:

  26. QUESTION:
    How do I cash out a 401K?
    I’m 21 I just quit my job and I want to cash out my 401K. Do I call my company’s human resources and just tell them I want to do it and will they just send me a check in the mail or is there more to it?

    • ANSWER:
      why not roll it over into a Roth IRA? You will pay a heavy penalty for cashing it out.

  27. QUESTION:
    401K cash out waiting period?
    I know it shouldn’t be done but, If I decide to cash out my 401k when I leave my job, does anyone know how long I have to wait to recieve a check? (I understand the penalities).

    • ANSWER:
      It varies…it depend on the bank or financial group your 401k is it. Your plan would tell you when you can recieve your check. For most, it can take 10 days to 30 days

  28. QUESTION:
    Do you have to pay taxes when u cash out on 401k?
    I cashed out my 401k when I left the company I was working for, and I don’t remember if I did or not? PLEASE HELP!

    • ANSWER:
      You “pay” your taxes when you file your taxes.

      They likely withheld 20% when they cashed out your 401(k) if it didn’t go to a roll over. I think that is required.

      You should get a statement.

  29. QUESTION:
    Why does my 401k cash out have to be done my mail and not online?

    • ANSWER:
      401k have strict policies that they have to go by and one of the them is to get signatures!!!

  30. QUESTION:
    If I am being garnished and cash out my 401k will they take my money?
    I am being garnished for over ,000 on a repossed vehicle. If I cash in my 401k can they take the money I owe them directly from the check I get for cashing in my 401k. Basically can they take the money that would be paid to me after the tax penalty.

    • ANSWER:
      I didn’t think they could touch your 401k — you might want to check on that first.

  31. QUESTION:
    401k cash out & unemployment benefits?
    I was recently laid off from my job and had to file for unemployment benefits. I also have decided to cash out my 401k to pay off my car loan. I reported it to the employment security department and have received and filled out the pension questionnaire. My question is how long until they notify me of their decision and how will the cash out affect my benefits. I live in Washington State.
    I know cashing out my 401k is not ideal. It isn’t that much only about 7k and some change.

    • ANSWER:
      401k is not a pension plan. Its a retirement plan that came from your own money and your employer’s money. A pension plan will pay you lifetime income. A 401k does not pay lifetime income. Its a liquidable asset such as a bank account that you can withdraw money anytime. Since you cashed out your 401k, you should be aware of the 10% penalty if you under the age of 59 1/2 and income taxes you will owe on it.

      Anyway, your 401k should not affect your unemployment benefit.

  32. QUESTION:
    Is this a good time to cash out 401k?
    Considering the dollar is about as dead as it can get, and most of us don’t realize it yet, is this a good time to pull it and invest in silver or gold? I have looked into silver, and if I had 10000 in silver a few years ago, I would have much more than the 401 produced in 30 years.

    • ANSWER:
      I wouldn’t recommend it. You never know what gold or silver will be worth in the future either. I would leave it where it is.

  33. QUESTION:
    What taxes will I pay on a rollover IRA and 401K if I cash out?
    My husband had 00 in a 401k (most was contributed this year) he lost his job and it was rolled over into an IRA. We did not do the rollover within 60 days. He is disabled and will not be going back to work.

    Here are my questions – 1. Will we have to pay taxes on the 401K since it was not rolled over within 60 days. 2. If we cash out the IRA now, would we have to pay taxes on both the 401k and the IRA?

    • ANSWER:
      Yes and if he is under the age of 59 1/2 the 10% early distribution penalty will also able plus the federal income tax at your marginal tax rate.
      Sound like the money that is the 401K is the same funds that was deposited into the IRA this year and the amounts are being withdrawn in the same year so NO that amount would not be taxable again because the IRA was not an IRA account for the year 2010.
      Hope that you find the above enclosed information useful and good luck.

  34. QUESTION:
    Rollover from 401k, need to cash it out. How much in taxes and penalty will I have to pay? ?
    I have a 401k from an employer that I used to work for for about k. I need the money, so instead of rolling it over, I want to cash it out to use.
    How much will it cost me in taxes and penalty?
    I am in a higher tax bracket, so will probably have to pay more.

    Thanks

    • ANSWER:
      You should figure on losing 40%-50% to taxes and penalties. Plus all of the money (3K if you leave it in a traditional IRA earning an average of 9% per year until age 65) you would have made if you left it in the roll over IRA. So you would only end up with ,600 to ,500 but, over your life you would lose 3,000.
      This is a BAD idea. Please DON’T do this!

  35. QUESTION:
    Is it stupid to cash out my 401k to pay debts? I am running into financial trouble…?
    I have a lot of debt and I am getting sued for some past debt. I know that taking money out of the 401k reduces my retirement savings, but isn’t that better than debt problems? I have 30 years left to work so I could build it back up over time…

    • ANSWER:
      GET OUT OF DEBT!!!
      If you have to dip into your 401k to get out of debt NOW, you will much less stressed and the issue will be over and done with. Then you can spend the rest of your working life building up your 401k. Just don’t run up any more debt! :)

  36. QUESTION:
    I quit my job, how do I cash out my 401K?
    I recently quit my job and now I need to know how I can cash out my 401K?
    (I understand it will be taxed, and I know it’s better to roll it into other options.)

    • ANSWER:
      It depends on the rules setup with your particular 401k
      offering, normally though it will take about 3 months after
      you have left. Your 401K administrator will contact you
      to see what you want to do (rollover, lump sum payment).

      You may wish to contact the administrator and see if
      you can get it earlier. You are correct, you will have
      a certain % (usually 20%) for federal withholding and
      will pay a 10% early withdrawal penalty, unless you are
      59 1/2 years old.

  37. QUESTION:
    Would it be wise to cash out my 401k?
    I really do not know what to do. I am 30 years old and have about 20,000 in my 401k. I have 5,000 in a separate IRA, about 00 in savings. However, I am swimming in debt. I have student loans that are up ,000 and some credit card debt. Cashing out my 401k would help a lot…Retirement seems so far away. Any advice would be appreciated.

    • ANSWER:
      I would say no. Don’t touch your retirement fund. You will have to pay penalties to do this. You said some credit card debt- if you want maybe just take enough out to pay these off. Students loans offer a low interest rate and I don’t think you have to be in a rush to pay these off-your money should do better in investing it.

  38. QUESTION:
    401K cash out vs. IRA
    I have the ability to cash out my 401k right now or roll over a portion or all into my IRA account. If I cash my 401k out, I know about the 20 percent penalty up front, along with the 10 percent additional at tax time. What penalites would I have if I rolled over my money into a IRA, then pulled some of it out?

    • ANSWER:
      All other circumstances being the same, you will get more cash sooner by rolling the money into an IRA and then taking the cash out. The 20 percent held out of the 401(k) isn’t really a penalty; it’s mandatory withholding. You might get it back at tax refund time.

      None of this is to say that the idea of taking it out is good for your retirement savings goal.

  39. QUESTION:
    Can you cash out your 401K and still get unemployement benefits?
    I am curious. I was recently laid off (401 fully vested) and am currently collecting unemployment. I got behind on my bills (medical emergency) and now have nowhere to turn but pull out my 401. I heard some people say that cashing it out will hault unemployment benefits. Is this true? No smart @ss comments please. Thanks!

    • ANSWER:
      No – its already your earned money, not new income. But you haven’t paid tax on it yet. So you’ll incur the 10% early withdrawal penalty plus it will be taxed as ordinary income come 2008 tax time.

  40. QUESTION:
    401K cash out question?
    I contacted the 401K company over 2 weeks to cash out my 401K from a company which I quit working for more than a year ago. I called them again and they told me that they sent out the document to my former employer for 401K cash out approval but they havent responded.. I need to receive the cash ASAP for payments..what happens if they just sit on it and do not approve the liquidation indefinitely? is there a time frame in which they have to approve the cash out? thanks..

    • ANSWER:

  41. QUESTION:
    401K Cash Out?
    Should I cash out my 401K for a downpayment on a house? I figure it would come out to be about ,000.00. I’m 39 and figure we could recover.

    • ANSWER:
      I agree it is a bad choice. Taxes plus penalty will leave you with about ,750 if you are in the 15% tax bracket. If you are taking the money out of your 401k you can afford the house. Buckle down and cut your budget to the bone. Cut out all wasteful spending and pay off all outstanding credit. Then save as much as you can. Wait till you have 20% down payment to buy house. House rich and cash poor is a bad place to be. I have been there.
      Also trying to catch up on the 401k money never works. Been there too. Still trying to catch up.

  42. QUESTION:
    Is it possible to cash out your 401K retirement money early when you quit a job to buy a house?
    I need to speak to a CPA about this, but I was just curious on what everyone thinks. I know I will be penalized for taking money out early and I do know that if I were hypothetically was going to take a loan out, it can’t be used to buy a house. However, what if I was to quit? Am I allowed to touch that money for a house?

    Any thoughts would be helpful. Thank you!

    • ANSWER:
      You will be taxed and pay a penalty. Then do whatever you want with the money

  43. QUESTION:
    Is it a good idea to cash out my 401k?
    I used to have a 401k with an employer a few years ago, I’ve been thinking about cashing it out. Is it a good idea? I can use the money to pay off some credit cards.

    TIA

    • ANSWER:
      Rolling the account into an IRA it a good idea. Cashing it out is probably not. You will pay a 10% penalty on top of income tax at your regular tax rate. As a rule, you can count on losing 40% or more of whatever you cash out. Also note, the 20% withheld is NEVER the actual tax due.

  44. QUESTION:
    Is it possible to borrow against or cash out my 401k without my employer’s knowledge?
    My employer does not match the 401k at all, so everything in there I have contributed myself. Is this possible to do if I go straight to the financial company that handles the 401k?

    • ANSWER:
      You cannot “cash out” a 401K account while still employed at the same employer.

  45. QUESTION:
    401k cash out question – help?
    Okay, my company merged with another company and we will have the option of cashing out our 401k – I have about 10,000 in it, however, I have about 5000 in credit card debt which is costing me around 0+ per month in bills AND my new company will allow us to contribute into a ROTH 401k. In addition I have a personal ROTH IRA that I can supplement with this extra money. My question is – or opinions that I am trying to gather is this – Does it make sense to become debt free at this time so that I can supplement ROTH investments that will allow me to pay taxes now and as I age and my income grows I will no longer be responsible for paying taxes on my compounding interest. Whereas this 401k – when I cash it at retirement (which I will be at a higher tax bracket) or roll it, I will have to pay taxes on it anyway.

    I am aware of the FIT deduction that will happen if I cut the check.

    What do you think yahooers?

    • ANSWER:
      roll it over and pay the debt out of income — remember time is money and the longer money is invested the more it makes!!!!

  46. QUESTION:
    Question on 401k cash out?
    I cashed out my 401k and was wondering how much i will have to pay on it.My ammount was 8973.92 they took out 1794.78 in federal taxes leaving me with 7179.14 how much will i have to pay on this.

    • ANSWER:
      I almost positive its a 10% penalty on an early withdrawal. There’s a couple of exceptions to this i.e. if you bought a house. The first 10k would be penalty free. I’m guessing its 7.39 you will owe. As far as the taxes, I have no clue what your bracket is.

  47. QUESTION:
    Is it wise to cash out my 401k to pay off my house- I changed jobs, amoritization is very high on my house!?
    I recently changed job, and am making 25% less, with the money I have in a MM and my little bit in 401k (30k) I could pay off my house and then eventually pay off my cc# debt (which is about 20k, then my car which is 8k). This way I can afford to live at what I earn, and sock money away for retirement, in addition to joining my new companies 401k. I see this as a big chance to get a leg up on life. PS I will turn 35 years old in a month. Any advice would be appreciated- I just don’t want to be one of those people whose house gets taken away if I loose my job or get seriously injured etc… I like the idea of knowing I will truly “own” my home! Thanks!

    • ANSWER:
      No it’s not wise to cash out but you should be able to borrow from your 401k plan combined with your other fund you should have enough to buy your house. You would take a big loss by cashing out early.

  48. QUESTION:
    How much will I lose if I cash out my 401k?
    I was laid off in Dec and now I am moving (my new job is an hour away and I am driving right now) I am going to buy a new house and would like to use the money from my 401k to put as a down payment. I was laid off from Dec-May. Would my withdrawl penalty be less because I haven’t made much money this year?

    • ANSWER:
      Your withdrawal penalty won’t be less, but your income taxes could be less, since may be in a lower tax bracket due to reduced earnings for the year. This is easy to model using tax software or even the IRS tax table which is on their website.

      You should not withdraw your 401k account if you can avoid it. If you roll over your 401k to the new employer’s 401k plan, you could take a loan from your account (where you pay interest, but to yourself) and could continue to make contributions and receive company matching contributions.

      If you roll over your 401k to an IRA you have the option of withdrawing only the amount you need and could avoid penalty on a ,000 withdrawal if this is a first-time home purchase. Here is some information on the first time buyer penalty-free withdrawal:

      http://money.cnn.com/2000/10/06/pensions/q_retire_askexperts/

  49. QUESTION:
    what’s the best way to cash out a 401k with the least tax or penalty? i really need the money for relocating..?
    i am relocating in 15 days and running out of options to borrow money. have been living on unemployment for months now and am moving to LA for a job offer. should i cash it out?

    • ANSWER:
      Cashing it out = taxes and penalties.

      No way around it.

      Taking out a loan requires that you still be employed at the employer as it is paid back through payroll.

      There are no exceptions to paying taxes. There are a few exceptions to paying the 10% penalty but having to relocate is not one of them.

  50. QUESTION:
    how do i cash out my old 401K?
    Recently a friend of mine received a notice that he could cash out his 401K from a previous job years ago. Apparently he was able to contact them and get the ball rolling, and soon will be receiving his ,000.00! Years ago I also had a job for a short period and had all the benefits etc…who do I contact to inquire about my savings?

    • ANSWER:
      Your friend’s situation has no bearing on yours. “Years ago” you had a 401(k) account yet haven’t been getting periodic account statements? You may think you had “all the benefits” but I’m betting that participating in a 401(k) plan wasn’t one of them or you’d know it.