401K cash out after termination - is there a penalty fee?

401K cash out after termination - is there a penalty fee?
Thank you all who have answered my previous question regarding cashing out on my 401K. My next question is: I am no longer employed with the company that I have worked with and is looking to cash out on my 401K instead of rolling it over. Will there be a 10% penalty fee even if I am no longer employed with the company?


Answers:

src50:  Yes.
2008-07-21 15:25:21
Jason:  Yes there is a still a 10% penalty and you will be taxed on the entire amount you are cashing out. It will be taxed as ordinary income. So figure 25% + 10% = 35% tax total.
2008-07-21 15:26:05
saberhilt:  Yes. You might try rolling it into a Self-Directed IRA. This would allow you to do things like buy Investment real estate with the money. It won't be like having the cash to go out an blow on a new iPod, but will allow you some access to it without the penalties and fees.
2008-07-21 15:26:25
rtfm:  Yes. Even if you are no longer with the company, the money in your 401K is still yours and is meant to be invested until you reach retirement age. If you withdraw it from the fund and don't roll it over into a new retirement account, you will pay the 10 percent penalty fee and the taxes on it as well.
2008-07-21 15:27:44
Tim:  Yes there will be fees. Avoid the fees by rolling over the funds into an IRA. talk with someone first to get the IRA setup. They'll get the funds transferred for you. it is VERY IMPORTANT the you do not take custody of the funds during the rollover or you will pay penalties. We use AG Edwards, they are now Wachovia.
2008-07-21 15:30:53
VET66:  I didnt see your previous post, but if your under 59 1/2 , all the other posters are correct.
2008-07-21 15:50:30
Chosen Answer
MarketStock:  Oh yeah!!! That penalty is on top of the taxes
2008-07-21 16:23:54
Grumple:  Yes, early withdrawal of the money will cost you 10% off the top, plus your standard tax rate off the top as well. There may be capital gains taxes as well. Roll it over to Charles Schwab or other discount broker and let it grow. Unless your in a tough situation I strongly encourage you to leave it in the 401k or Rollover IRA.
2008-07-21 16:32:15
what?:  the only way to dodge IRS penalties is to do a rollover. if having access to your money tomorrow is worth losing up to 45% in taxes (depending on the size of the 401k account) then by all means cash out. seems a bit irrational to me, though. i mean, credit cards only charge ~20% (or less than half of what you would lose to the IRS)
2008-07-21 16:54:33
robe:  A minimum of 10%. Avoid cashing out a 401K if at all possible. You want to keep that money tax-protected.
2008-07-21 22:32:43