I am changing employers and have a 401K. If I cash it out what kind of taxes will I have to pay on it? Also according to my quarterly It gives a amount that I contributed and the amount the employer put in. What is the amount I will be taking with me?
2007-02-05 09:49:39 · 9 answers · asked by grizleygal 2 in Business & Finance ➔ Personal Finance
I would not recommend cashing out your 401(k) becuase you will pay taxes...Instead look into rolling it over into a personal IRA...Talk to your bank or a financial advisor about how you would do this...
As for the contributions...All of your contributions will be yours to keep...You need to talk to your employer or HR department regarding your companies Vesting Schedule in order to find out how much of the Employer's matching (if any) will be your money.
2007-02-05 09:54:05 · answer #1 · answered by JesJ 4 · 0⤊ 0⤋
You don't provide your age, how long you've been there, and income so it makes it more difficult to tell you the true tax implication.
If you're under age 55 then you likely will incur a 10% extra tax. They will not withhold for this but you will get hit with it when you file.
They will pay you your vested account balance (all the money that you put in plus earnings PLUS the vested portion of the money your employer contributed) less 20% that they submit to the IRS for withholding. Depending on your total income for the year you may owe additional tax or may be entitled to a refund. If you're in the 20% tax bracket then you'll owe additional money (remember you owe 10% MORE).
That being said...taking a distribution is incredibly shortsighted...For every 10k you take you are likely costing your retirement $100,000. So, whatever you spend your distribution on had better APPRECIATE in value at least that much or you're kiling yourself. And no, paying off bills is not appreciation. Those will eventually disappear with due diligence....If you take the distribution you will never "catch back up"
2007-02-05 11:33:29 · answer #2 · answered by digdowndeepnseattle 6 · 0⤊ 0⤋
DO NOT CASH IT OUT! If you take the money out, you will have to pay crazy penalties on it, in addition to the taxes you have to pay at your current tax rate. You will need money in retirement more than you need money today. Let that money be there for what it's designated for! You've already done the hard part and saved it. You should roll the money over into an IRA. Fist open an IRA and your IRA company (Vanguard, Fidelity, etc.) will take the money directly from your 401k.
About your employer match: many employers don't let you take what they've matched unless you've worked there a certain amount of time. Ask your HR department.
2007-02-05 09:57:44 · answer #3 · answered by lizzgeorge 4 · 0⤊ 0⤋
If you do choose to pull your total 401k from the old company,w the tax is around 20% unless you have an IRA or 401k to transfer it to. The employer contributions are yours also.
Once you've taken the money out, including the 20% "penalty" you have 90 days to place that amount into another retirement account. The catch is, if you hadn't decided where to place the money when you pulled it from the original account, you need to come up with that 20% you were taxed in order to get that money back at the end of the year.
It really is in your best interest to have a retirement account reay to transfer te money into, so you don't have to worry about the tax.
2007-02-05 10:00:50 · answer #4 · answered by Jen J 4 · 0⤊ 1⤋
The last thng you want to do is cash it out. You will pay a 10% penalty for being under age 59.5 and pay income taxes. So the entire amount will be added to your income. For your employer's contribution, if you are fully vested, you will take it all with you. If not, it depends on the vesting schedule. The smartest thing to do is roll it into your new 401k or into a traditional IRA.
2007-02-05 09:56:31 · answer #5 · answered by fretzdawg 2 · 0⤊ 0⤋
If you cash out your 401k you'll pay up to 20% in taxes - can't remember the formula exactly, but it is a minimum 10%.
As far as your contribution vs. company contribution. Your contributions are always 100% vested and you will take all of them with you. The company amount you will take depends on the vesting schedule. If you're 50% vested in company contributions, that's what you'll take with you when you leave.
Hope this helps.
2007-02-05 09:57:13 · answer #6 · answered by stellargoddess01 2 · 0⤊ 0⤋
I am 64 years old and currently unemployed. I have a 401k in a drilling company that I worked for a few years. I was thinking of putting it into a Rollover IRA with TD Ameritrade. Since I don't have any other source of income, I would make monthly withdrawals from this account.
Is this a wise decision?
Please advice.
Keith
2016-05-12 02:17:32 · answer #7 · answered by Keith 1 · 0⤊ 0⤋
If you are under the minimum distribution age then you will incur a 10% penalty plus the money will be taxed as ordinary income.
Companies usually have a vesting period. You need to check to see what your companies vesting period is in regards to the employer match.
For example, the company I work at has a five year graded vesting schedule. You are 20% vested every year until year five when you are 100% vested.
2007-02-05 10:31:10 · answer #8 · answered by Michael 2 · 0⤊ 0⤋
DO NOT "cash out", just tell your new employer to start a new 401k and directly transfer the money in your former employer's 401k to theirs. No taxes.
2007-02-05 09:54:38 · answer #9 · answered by gosh137 6 · 0⤊ 0⤋