|
What are the Advantages and Disadvantages of Cashing Out your old 401(k)?
Advantages of taking money out of your 401(k) retirement account
| |
-
Fast Money: You will get the money that is left over (after all mandatory federal and state taxes, as well as applicable penalties have been subtracted), right away. (Please note that this does not mean that all of your taxes have been paid or that you are free and clear on what you get.)
|
|
Disadvantages of taking money out of your 401(k) retirement account
| |
- Goose eggs: The money is gone and you now have a bunch of 000’s where your retirement savings used to be.
- Opportunity Cost: In addition to depleting your savings, after raiding your retirement nest egg you also give up the potential growth that you could have earned on the money if left invested.
- You will end up getting a lot less money than you expect:
- Mandatory 20% withholding for federal taxes (state taxes may also be withheld): If you are under age 59½, the entire amount that you withdraw will be subject to a mandatory withholding. (Remember, this is only the mandatory withholding, you still have to pay taxes on the entire amount in the year that you cash out.)
- Tax Effect: Your entire distribution will be subject to applicable federal, state and possibly even local taxes (due in the year that you take the money out).
- Early Withdrawal Penalty: Your entire distribution may be subject to a 10% penalty if you are under age 59½ and you do not meet any exemption requirements.
- Where is the rest of my money? You could end up getting a check for nearly half of what you expected after taxes and penalties are taken out of distribution.
- It may cost you even more money than you expect:
- Even after taxes on your distribution are paid, cashing out may cost you much more than you expect because the total amount of your withdrawal may be included in your earned income for the year and could potentially put you in a higher tax bracket causing you to pay higher taxes on all of your earned income for that year.
- Additional Costs: Since you should definitely consult with your tax and/or legal advisor prior to taking a distribution from your retirement plan account, you will have to pay additional fees for their time as well.
- You will use money that was legally protected from most creditors: You will lose the ERISA protections on the money which, when left in your 401(k) retirement account, would otherwise have been protected from creditors and the impact of bankruptcy in most cases. (See ERISA protections.)
- Could of, should of would of: You may have to listen to your inner voice saying could of, should of would of, etc. for the rest of your life as you wish that you still had that money and imagine what might have been! You really don't need that extra stress in your life!
|
|
| |
Smart Money Move:
Rollover your old 401(k) to a Place Trade IRA today!
Rather than suffer through all of the disadvantages above and risk a lower standard of living than you had planned for your golden years, make the smart choice and take control of your financial future!
|
|
Call us today at 919-719-7200 or 800-50-PLACE for more information!
Should I cash out my 401(k) retirement account or roll it over?
Related Articles
Changing Jobs? What to Do With an Old 401(k)
Should you leave it behind with your old employer? Roll it over to the plan at your new job or to an IRA? Or should you Cash Out of your 401(k) instead of rolling it over? If you need help with your decision or on how to move forward then please check out the options above and call us at 919-719-7200 to get assistance from one or our retirement specialists or to begin a relationship with an experienced, full service financial professional who will be able to provide you with full service and investment advice.1
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 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.
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)
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
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.
|
|
