Is there any way around the fees for cashing out a 401-k plan?

Question

Dont want a IRA -just want the money- I co own some rental property- I was wandering is there a way to cash out w/o the penalties. I'm a Cali resident...

Answer 1

Contact the plan administrator about making a withdrawal. If your 401k is with your current employer, you may not be allowed to make withdrawals.

If you are allowed to make withdrawals, you will have to pay income tax on the withdrawals no matter what. If you are under age 59.5 or do not meet another exception, then you will pay an additional penalty of 10% tax on top of the income tax. There will be mandatory withholding of usually 20% on your withdrawal, and that will most likely not cover all the taxes you will owe.

Your rental property has no bearing on the costs of withdrawing from your 401k.

Answer 2

No way at all. If you cash it out your going to pay a penalty no matter what if you are under 59.5 from a 401k. The penalty for early withdrawal is 10% and the amount required to be withheld for Federal Tax is 20 percent. There are no exclusions to this. There are some exclusions if withdrawing it from and IRA, but usually just for the first time home purchase, where as this is rental property, you will not be excluded.
Sorry.

Answer 3

Many plans don't let you withdraw the money if you're still employed by that company, so you might have to quit your job. You can often borrow against your 401K, though, without penalty.

If you're talking about the 10% penalty for early withdrawal that you'll owe to the feds, then if you don't roll it into an IRA you'll have to pay it. If you roll it over first, there are some exceptions to owing the 10% penalty.

In either case, you'll have to pay income tax on the money in the year you take it out - it hasn't been taxed yet. If you roll the 401K into an IRA you don't pay income tax on the money until you take it out of the IRA.

Answer 4

nope, no way out.