withdrawing money from 401k plan due to job loss?

Question

I will be relocating to another state and have to quit my job and have a little over $5000 in my 401k plan..what happends with this money after I quit? Do I have the option to transfer these funds into an IRA and/or withdrawal the money? I really need this money to help with my move and some other expenses...what are the penalties if I withdrawal all of it? thanks

Answer 1

You can take out the money and you will pay 33% off the top. This is never a good idea, you can roll it over or if you are getting a job at a new place you can tranfer to their plan, This should be a last resort

Answer 2

I'm not sure where you're getting your information, but here's the correct scoop. First, and most important, you ALWAYS have the ability to roll over your balance so long as YOU initiate the transaction. Since you have over $1,000 in your account even if THEY initiate the distribution (which they can) they would have to roll it over into an IRA. Second, you do not have the option to decide how much in withholding you can have taken; it's a flat 20%. Mind you, that's not how much you will be taxed. Just how much they will withhold. Only in-service withdrawals have the option to determine how much in withholding there will be. The only other option that you have in regards to withholding is for state withholding. That's a voluntary payment. As for the 10% penalty...that's on your tax return. But if you had a refund last year of more than $130 then I wouldn't worry about it. You will still get a refund this year, just likely a little smaller.

Answer 3

yes you have the option to transfer to your new jobs 401k, roll it into an IRA or take it in cash. If you take it in cash you will receive 80% of the balance right away. The other 20% will be sent to the IRS for withholding. Then you will be taxed on it when you file your taxes next year. It will be treated as ordinary wages and you'll be taxed on it as such. If your tax bracket is above 20% then you'll owe additional taxes. If it's below then they'll have withheld enough to cover the taxes. BUT, you will owe the 10% penalty for early withdrawal. That's an extra $500+ that they won't withhold for...so if you go this route then be prepared. Oh yeah...and also plan on working an entire extra year...as 5k taken now will cost your retirement plan about $60,000 at age 67.

Answer 4

Withdrawing it is a TERRIBLE idea; you will likely get less than half after taxes and penalties. If you are still in your 20s, if you leave it where it is it could grow (all on its own) to over $600,000 by the time you retire (over a million if you are in your early 20s).

Unless you are firmly convinced you are so inept that you won't be able to find work within two months, you would almost be better off borrowing $5000! (Though I'm not recommending that, either!)

Take a moonlighting job delivering pizza before you tap you 401(k), seriously!

Good luck!

Answer 5

You have three options: 1-Cash it out; 2-Leave it where it is (former employers don't like this, but they cannot force you to move it); 3-Roll it over to an IRA or new employer's 401K plan. If you cash it out, you will have tax withheld from it because it becomes taxable income immediately. You will also pay a 10% penalty when you file taxes next year.

Answer 6

If you quit your job, you do not qualify for a hardship withdrawal as you purposefully caused the hardship.

However, if you were terminated involuntarily, and suffered a hardship per the IRS guidelines, you could remove the money, PAY THE APPLICABLE INCOME TAX, and avoid the 10% penalty.

However, how you have laid out your scenario. You are not suffering a "job loss" -- you are suffering as a result of a job resignation!

Answer 7

you will be taxed/penalized on the amount you withdraw, but yes, you can withdraw this money