Cashing out your 401k
If you want to take a 401k withdraw then you should consider all of the pros and cons of taking money out, this is especially true if you want to take out money at an early age.
If you are over the age of 59 ½ all money that you take out is penalty fee, but you still need to pay taxes on it. It is important to note that you do not have to start manually taking money out from your account until you turn 70 ½.
If you have not recieved the retirement age 59 ½ then a cash out 401k option might not be in your best interest. Any money that you take out of your account will have a 10% penalty attached to it. This means if you take out $30,000 from your 401k $3,000 of it will go torwards paying for this early withdrawal fee. That doesn’t even include the taxes you have to pay. All of these fees can add up pretty quicky meaning you will have to take out even more money to take care of your bills.
In addition to that this money could have had the potential to grow over the years. Basically if you do not need the money then it is probably better to just let it stay in there.
If you really need to get money right now then you may want to look at taking out a loan from your 401k. The 401k loan laws allow you to borrow money from your account at a very low interest rate. All the money that you do borrow would eventually be put back into your account when you pay the loan back so it would have a very small affect on your account in general. This could be a better option if you have income coming in, but just need some quick cash now.
Whatever you decide to do just remember that any money you take out now will stop working for you. Consider all of the consequences and rewards before making your final decision.