Should I start adding more to the account before I quit my job? Where do I put the money while I'm earning my degree, hopefully only about 2 years. Or should I just cash it out and live off it?
2007-02-16 11:08:10 · 6 answers · asked by Violet777 3 in Business & Finance ➔ Personal Finance
If it is a very small amount, the employer can force you to cash it out. If it is larger, they cannot require you to do anything with it. You can leave it with the employer, roll it over to an IRA or another 401K, or cash it out if you choose. Cashing it out will give you a big tax hit; it's better not to do that if you don't have to.
Until you decide for sure if you are going back to college, put the 401K deductions on hold and put it in regular savings or other investment that it is easy to cash out without penalties. If you are not working, you will want to have some extra cash available.
2007-02-16 11:41:06 · answer #1 · answered by Brian G 6 · 0⤊ 0⤋
Do not cash it out. There are HUGE tax penalties for cashing out a 401K prior to retirement age.
Just leave it alone and let it keep earning for you. Once your finish school and get another job, you can roll it over into your new companies 401K plan if they have one. Or if you want to move it now, roll it into an IRA.
The absolute worst thing you can do with it is cash it out. You'll pay taxes on all the money in there, since that is untaxed money at the moment, PLUS the IRS charges an additional penalty for cashing out a retirement fund before retirement.
2007-02-16 19:14:10 · answer #2 · answered by Faye H 6 · 1⤊ 0⤋
Never cash it out! Paying penalties just wastes money! I don't see any reason to contribute more...just consider it the start to your retirement account. When you eventually get back to work, it will be there to build on.
You can just leave it with the company you are leaving, but my advice is to simply rollover to an IRA. There are no penalties, and if you use a company like Vanguard or Fidelity, they will normally just send you the right paperwork and do it for you.
2007-02-16 21:35:24 · answer #3 · answered by CG 6 · 0⤊ 0⤋
don't cash it out. You won't be able to afford to live off of it after you pay taxes on the whole amount.
I would just let it sit there, or roll it over into an IRA. Ask a financial advisor at a bank or credit union.
2007-02-16 19:12:11 · answer #4 · answered by Michael D 2 · 1⤊ 0⤋
Cash out only if you really need it otherwise, you'll get hit with penalties and fees.
If you can live without it then roll it over to a qualified IRA.
El
2007-02-16 19:30:44 · answer #5 · answered by El_Nimo 3 · 0⤊ 0⤋
Save it for the 4 years.
2007-02-16 19:15:05 · answer #6 · answered by John R 4 · 1⤊ 0⤋