Magazine article Black Enterprise

Cashing in A 401(k)? (Ask B.E.)

Magazine article Black Enterprise

Cashing in A 401(k)? (Ask B.E.)

Article excerpt

How do I go about cashing in my investments since I've been terminated from my job for a year, and I'm no longer contributing to the 401(k) plan?

--F Crisp
Via the Internet

If you've lost your job and still have investments in your former employer's 401(k) plan (or other retirement plan), don't be so fast to take a cash distribution. Remember, those funds may represent most of what you'll have to retire on, and taking a cash distribution before you reach age 59 1/2 means you open yourself up to major tax liabilities that will deplete the very money you want to use.

If you don't really have to use your retirement account, don't. When you cash out your 401(k) before age 59 1/2, you must pay federal income tax at your current tax rate, plus a 10% penalty--and your state may also require you to pay state taxes, as well. We encourage you to avoid cashing out because it can slice your retirement sum by as much as half. …

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