I'm retiring in January 2010 and want to cash out my 401K in a lump sum to pay off credit card debt to free up the money I would normally pay out on the credit cards monthly.

I do not need monthly income from the 401k. I am aware of the taxes due. Once I retire, am I able to take out the entire amount and shut down the whole 401K. I do not have a lot in there but want to get out from under the credit card debt.

I'm not clear here, are you wanting to cash out now or in 2010? If you are looking to cash out now, I would counsel to wait. The purpose of a 401(k) is to defer taxation until retirement when you taxable income is lower.

If you retire at the beginning of 2010, then your 2010 income should be lower. But if you cash out now, 2009, the higher tax bracket will mean a bigger tax bite.

Thanks, Scott. I plan to retire in January and cash out then. Not now.
You've been a big help!
Lacy