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How to Roll Over Your 401k.


So, times are tough and you are thinking about cashing out your old 401(k) to repair your car or perhaps you are asking yourself the question “should I use my 401(k) money to (buy a house, pay my bills, go on vacation, etc.)?"

Frankly, the answer is No. That may not be the answer that you are looking for but it is very important that you take investing for your retirement very seriously. It does not matter if you are only 25, you know that you will never get old and will never need the money. It doesn’t matter if you only have a few thousand dollars in your 401(k) account because you know it won’t make a difference. Right? Wrong! 



Cashing out of your 401(k) plan is perhaps the most ineffective (and tempting) of your options when changing jobs or thinking of taking money out of your retirement plan! 

Literally barring a life or death emergency you should never cash out your retirement account. Never! Buying a new computer, car, home, vacation, flat screen TV or paying off credit cards, paying for a child's education,* getting creditors off of your back** or whatever is not a life or death emergency. It may feel good for a moment but it can destroy your retirement dreams.

If you have $10,000 in your 401(k) and you decide to cash it out today then you obviously have nothing left.





If you leave it alone and it only earns 4%, 6% or 8% between now and Retirement it will still grow substantially.      

  View growth via 4% interest compounded over time   View growth via compound interest at 6% over time   View growth via compounding 8% interest over time  


Still considering cashing out your 401(k)?  Consider this:



Taxes and Penalties for Early Withdrawal!


Taxes: You may be taking home a lot less than you think… and it may be much more expensive than you think! If you choose to cash out, 100% of the amount that you cash out of your retirement account becomes fully taxable.  

Why is that important?  

For starters, if you are thinking “Ka-Ching!” You may be in for a big surprise. For example; If you were only cashing out $10,000 and you were younger than 59 ½, you will automatically need to chop 10% off of the top of your anticipated payout. Then, most employers withhold Federal and State income taxes so if you happen to know your tax bracket you can do the math on that one. 

For illustration purposes – let’s say that you have to pay 25% federal tax and 5% state tax. If you take the taxes and penalties out you will lose roughly 40% off of the top (more if you are in a higher tax bracket). If these are your only fees then your $10,000 windfall suddenly turns out to be only $6,000 by the time it reaches your hands but you do get to send your money straight to Uncle Sam instead of using that extra $4,000 on your intended purpose.  

Consider the examples in the graphs above and ask yourself if it is worth it to get roughly $6,000 today (from your original $10,000 minus the taxes and penalties) and give up all of the growth that you could earn if you left it alone. 

In addition to being fully taxable - the withdrawal is treated as earned income in the year that you make the withdrawal. This amount is then added to your current income and could potentially push you into a higher tax bracket - causing both your regular income and the amount of the withdrawal to be taxed at a higher rate.  

You could end up with significantly less than you expected between taxes that are withheld, penalties for early withdrawal and the potential bump into a higher tax bracket. Be sure to consult with your tax adviser prior to making any changes.


Rather than spend your retirement account today you could have much more money to spend in retirement.




Retirement plan specialists are available to help you assess your options and determine which retirement planning strategy best fits your needs.



Call us today at 919-719-7200 or 800-50-PLACE for more information!


Changing Jobs? What to Do With an Old 401(k) 


Retirement Planning: Individuals

Traditional IRA Roth IRA Rollover IRAs 401(k) Rollovers

Qualified Plans: Business





  Trade Options | Margin IRA IRA Trading Permissions Get Advice or Trade Online Cashing Out your 401(k) Switching Jobs? View Options From Ramen to Retirement  

What can you do with your 401(k) when you change jobs? Get straightforward advice about your retirement plan options so you can make smart decisions! How to Roll Over Your 401k. 401k roll over
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Make smart decisions with your old retirement plans today so that you can maximize your potential and get the most of your financial future!


Rollover your old 401(k) to a Place Trade Self-Directed IRA or Speak with one of our Experienced Financial Consultants to get Advice on your options or help develop a new financial plan.

Please be sure to check with your tax and/or legal advisor prior to making any contributions, withdrawals or other changes to your retirement account. Place Trade Financial, Inc. does not offer tax or legal advice. Information provided by Place Trade is for educational purposes and should not be considered as tax or legal advice under any circumstances.


Learn more about retirement planning by visiting some of the links below:

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Traditional IRA

Qualified Plans

Rollover IRAs

Find out how Place Trade can help you get the most out of your college planning by visiting some of the links below:

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