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ecrovid · Jan 10, 2006, 05:08 PM

These questions deal with a 48 year old man, married to a 40 year old lady. I understand that cashing out 401K attracts a penalty of 10% and income tax of 20% if cashed before one is 59.5 yrs. Is this correct? Secondly, if one is short of cash and decides to cash out before they are 59.5 yrs, can they put back in (the 401K) within a specified time, the cashed out amount in order to avoid a penalty? If so, what is the time frame? What does it mean to roll over to an IRA? If you choose to roll over to an IRA, do you pay any penalties? I understand one spouse cannot cash out their 401K without an affidavit (legally documented authorization) from the other spouse. Is this correct? If such is the case and the other spouse actually cashes out without informing the other spouse, what is the legal redress? How can one avoid a penalty when they cash in their 401K?

fredg · Jan 11, 2006, 07:47 AM

Hi,
I have a 401k myself, hoping to keep it there for a while longer. I am 63 yrs old, and retired now, due to family health issues.
I can only answer as to who can withdraw from the account. I called my Plan Administrator, they sent me a form to fill out and have notorized by my wife. I gave her "Power of Attorney" over the 401k account. She can make any decisions as I can, which means she can withdraw it if she wants to, on her own now. We have been married 28 yrs, and I gave her that authority in case something happens to me. She will have no problem in getting the money.
The 20% withholding is for taxes, and is automatically withheld, at any age.
As far as the 10% penalty, you need to call your Plan Administrator for that info. I wouldn't want to guess on it. Some plans allow you to borrow money from the 401k, then pay it back with interest, which also goes back into your account. Check with the Plan Administrator.
Your Plan Administrator can also answer all your other questions.
I hope this helped somewhat, but do not want to guess at the other questions you have. I do wish you the best of luck.

teresao · Mar 2, 2006, 05:18 PM

What's the penalty for cashing out your 401k

fredg · Mar 3, 2006, 08:19 AM

Hi, teresao,
Please call your Plan Administrator for details.
Normally, if you aren't of age yet, to withdraw without penalty, it's 10% for early withdrawal, 20% withheld for Federal Taxes, and if you have a State tax, that will have to be paid later.
So, you could possibly lose approx. 33 to 34% of the total amount in your 401K.