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    kinghi's Avatar
    kinghi Posts: 1, Reputation: 1
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    #1

    Aug 19, 2009, 02:24 AM
    Closing 401k
    Apology in advance for the repetitive question but I couldn't find a topic specific to my situation.

    I am thinking of closing my 401k to pay back some urgent debt and to move. I have successfully avoided this for some time but now there is no choice. The balance isn't that large, about $2400. I will not qualify for a loan nor a hardship. I have read about the 10% penalty and income taxes but this was directed towards questions about hardship withdrawals. Can I expect the same if I completely close when I cash out? Oh and I am a current employee age 21 if that makes a difference.
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
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    #2

    Aug 19, 2009, 11:31 AM

    Yes - you will owe income tax on the withdrawal as well as the 10% penalty. However, given that you are an active employee, your plan may not allow you to make a withdrawal except for hardship reasons. You should ask your 401(k) plan administrator whether you are allowed to make a withdrawal.
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