Is it difficult to quit a 401k Plan that is employer sponsered?

Answer 1

No. This is YOUR 401K, and just a benefit of your job. You can move it to another place if you like, or you can simply tell your Human Resources department that you want to close it.

There are, however a couple of things to keep in mind. If you close it, you are going to get hit with major taxes. Off the top, the IRS will take aproximately 40%. Really give this a lot of thought before closing it, because this is what it's going to COST you to do it. If you have $10,000 in it and close it, you're going to PAY $4,000 to get your money. Not a very good deal.

Also, is your employer matching any of it? Their match is free money. For instance if they contribute 4% for every 5% you contribute, for every $100.00 you contribute, they put in $80.00. That is LOST money if you move the 401K from your employer. If you're not sure if they match, ask. You may be missing free money by not being signed up to recieve it.

Think this one out before changing anything.

Answer 2

Let me clarify some of Amy N's answer.

If you decide to take out money from your 401K before you reach a certain age then there is a tax penalty. This is not adviseable.

No, it is not difficult to quit contributing to your 401K. You need to speak with the either the company that is responsible for the plan (i.e., fidelity, charles schwab, etc.) or your company's benefit specialist and tell them that you want to lower or discontinue your contribution to $0 and ask them for the procedure.

Now if you don't want that money in your 401K because you are quitting or for whatever reason, then you can move it to an IRA with of your choice (i.e., with your bank, Fidelity, Charles Schwab, etc.)