Cashing Out 401k Rules  

     You can cash out your 401k but you should think twice before you do. In addition, there are certain cashing out 401k rules that could cost a lot of money now, and still more later on. That is why you should be prudent when it comes to cashing out your 401k.

      When you leave your job, you have the following options with regard to your 401k plan:

  • You can leave the funds with your former employer
  • You can rollover the funds to your new employer’s retirement plan
  • You can rollover the funds to an IRA
  • You can cash out your 401k and pay the required penalties

       While most financial experts will advise you to rollover your 401k funds rather than cashing out, there are some people who prefer to cash out. This obviously changes from person to person based on their individual situation.

Cashing Out 401k Rules:
       If you decide to cash out your 401k, there are certain rules in place that cost you a substantial amount of money.

        For early withdrawal of money from a 401k account, you are slapped with a 10 percent penalty. In addition, the amount you withdraw becomes taxable and you will have to around 30 to 40 percent taxes.

        If you cash out your 401k, you will have to pay federal and state tax. You will also have to pay the penalty but this is only valid if you are under the age of 55 years at the time of leaving your job.

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