What do I need to know about closing my 401-K?

Answer by  joshm89 (491)

By withdrawing money from a 401k early, not only will you be taxed, but you will also have to pay a 10% penalty to the IRS. Your best way of doing anything with a 401k is by putting it into a Roth IRA. By rolling it over, is one of your best bets in this scenario.

Answer by  chrisshah (172)

Consult your tax advisor to understand tax implications. Make sure that you can afford the penalties and the tax bill. A phone call to your administrator should be sufficient.

Answer by  tamarawilhite (17883)

If you cash out the 401K without rolling into an IRA or another 401K, you will owe income taxes and a 10% penalty.

Answer by  Cecilia (2828)

If you cash out your 401K as opposed to rolling it over, you will have to count that as income this year and pay taxes on it. If you are under 59 1/2 you will also have to pay a 10% penalty when you file taxes next year.

Answer by  John (9008)

There are substantial penalties for doing this. Not only will you lose some of your invested money directly, but the tax consequences are very dire. It is almost never a good idea to cash out a 401(k) prematurely. Many 401(k)s will let you get a loan from the balance, which is almost always cheaper.