My husband has just changed companies. He had money in a 401K investment plan which we wanted to put into a money market fund with our bank, so the investment firm we had the money with sent us a check made out to my husband and the bank. Now we find that we need the money for an unexpected financial obligation. How do we pay the penalty so we can use what's left of the money. It is only about 8500.00. We have not taken the check to our bank as yet, it just arrived yesterday. Will the bank endorse the check and take out the penalty fees, or do we have to send the check back to the investment firm and have them issue a new one with the penalty and fees taken out?

I strongly advise against using that money. The penalty and taxes would be too costly. Does his new job, have a 401K? If so, I would rollover the money into it and then take a loan out against it.

The penalties are paid when you do your taxes. If you were going to roll it over into an IRA, then the plan probably did not withhold taxes. So, in addition to the $850 penalty, you will also pay an additiona. $1500+ in taxes. In otherwords you are throwing away almost $2500 to use this money.

And yes, you will have to get the plan to reissue the check