Cashing Out Your 401(k)

I recently received this question from a reader:

I recently left my job and am trying to get my funds turned over to me from my 401(k). I cannot seem to get the company to give them to me even though I have followed every procedure to do this. What can I do to get them to cut me a check?

If you are following procedure, you should have no troubled getting your 401(k) money if you have left your job. However, if you left for another job, it might be harder to cash out your 401(k) because it is generally more difficult to cash out when you are employed. If you have a new job, you might consider a rollover to the plan offered by your new employer. Other than that, the only ways to force companies to give you what is yours is to take other types of action. Try visiting the human resources department. Speak with the company's retirement plan overseer. These people are paid to help you understand the process and take the proper steps to manage your retirement plan. Make sure that you really are following proper procedure. If you are still having trouble, you can threaten legal action. Get an idea from an attorney about what sort of options you have in that area. Unfortunately, that could get expensive.

Cashing out of your 401(k) may not be the best idea

It sounds like you are interested in cashing out your 401(k) rather than rolling it over. This may be a bad idea, even if you are not employed. Many people feel tempted to cash out a 401(k) to help with hard economic times. But this can be more detrimental than helpful. When you cash out a 401(k), it is considered income, and the amount is subject to Federal and State income taxes. Furthermore, if you are not at least 55 years old, you will have to pay a 10% early withdrawal fee. All of this can cut into your funds significantly. Even loans against your 401(k) come with hefty fees. You would actually be better off to roll your 401(k) into an IRA, which has more flexibility in taking out loans against the retirement plan. You can roll a 401(k) into an IRA even if you are not employed. Get some help from a knowledgeable broker or attorney in properly rolling over your 401(k) so as to avoid tax consequences. But make sure the fees charged by the broker are reasonable.

For more information on 401(k)s, visit the following Web sites: 401kHelpCenter, Women's Finance, Bankrate , Forbes.

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