I need info on how to cash out my 401k.?
Answer:
First I want to ask why you want to. There are various circumstances that may help you avoid penalties. If you simply want the money, make sure you understand that the money was put into the account before taxes, so it has not been taxed. When you take it out, you not only have to pay taxes on it, but depending on how much it is, you could raise your income bracket and all of your income will be taxed higher at the end of the year, plus they will take a 10% penalty which is not tax deductible.
If you still want to do it, simply contact the plan administrator and tell them you want to close the account. Just make sure you know what you're doing.
whatever institution you have it with has to withhold a 10% penalty. they do all the work.
Consider cashing out only as a last resort. Not only do you have a 10% penalty but you also have to pay taxes on the money at tax time because it is considered income. This is not true for special needs or after the age of 59-1/2. You may want to consider using the amount as collateral for a loan but it MUST be paid back to the 401 fund. You are better off leaving that money into the fund until retirement even if you stop contributing to it. At least let it earn interest. You will be very sorry if you cash out early both at tax time and retirement time.
If you have not separated from service (quit your job) you can't. If you have separated from service, you have to notify the plan administrator that you want the money. Unless you meet exception criteria, the will withhold an extra 10% on top of the 20% they take out in taxes. Then, at the end of the year, you will have to make up the balance of the taxes. Typically this will cost you between 30-50% of your balance when all is said and done.
This is a really bad idea. Instead, you should roll your money to an IRA at a no-load, low cost provider like Vanguard of Fidelity. You will need this money when you retire and the longer it is earning the more you will have.
Good luck!
pf101
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