What happens if I cash out my 401k?

It’s a bad idea…but YEP we’ve had to do it.

I’m not sure what your tax bracket is however, you can withhold the taxes when you cash out. Make certain you do that or you’ll have to come up with cash at tax time in April.

You will pay taxes on that money as of the time you earned it, and your financial institution may impose fees and penalties depending upon what instrument it is in. My advice is not to do it. I am 60 with a drastically underfunded retirement account. Now that might not be close enough to scare you yet, but I suggest you spend a few minutes thinking about what happens to old people in bad nursing homes where they abuse the patients.

It’s not really worth it. By the time they tax it and you pay the penalty, you will only recieve about half of the money. It’s up to you to decide if you need just 1,000 now. Another way to get some money would be to borrow from it. In some cases, you can borrow only half of what you have in your 401K. The reason this may be better for you is that you pay yourself back in your 401K. If the amount of money you need is around 2,000, then you might do better to borrow it from a bank or credit union.

Thanks for the responses. I’m trying to get away from borrowing as I’ve maxed my credit cards and I am unable to get approved for any other loans at this time. I pay everything on time I have just high balances which is hurting me right now. I’m 21…I only make 30,000 a year. I really don’t want to ask friends or family to borrow either. This sucks, it’s my money how can they charge me all these fees? I understand about the taxes. God I need help.

You needed the help before you maxed out your credit cards.

You will also have to pay a penalty on top of the taxes… by the time you’re done, you won’t get anywhere close to $2k

Chances are if your 401K is with your current employer you will not be able to cash it out unless you are over 65 or no longer employed there. Under certain circumstances some employers let your borrow from it. If you 401K is not through your employer you can find out what your tax bracket is and have that percentage taken out before you receive distribution but there will still be a slight penalty charge. I am in agreement with everyone here that it is a bad idea either way.

So yeah- Uncle Sam helps himself to a bunch of it basically. :(

Not that I don’t appreciate public welfare and a way to fund it. :)

Are the reasons for needing it due to medical or educational expenses? If so, talk with a CPA or tax attorney; you should be able to withdraw for these expenses without the penalty.

I want to relocate to another state and start a new job. Its time for a change.
Am I able to cash out the existing 401K, that I have at this job now?
The 401K funds would allow me to pay all my credit cards and loan. I would still have enough left over to get ready for tax time.
OR
Does the 401K company take the taxed out before they would hand over funds to me?