# Cashing out a 401(k)

**URL:** <https://boards.straightdope.com/t/cashing-out-a-401-k/358744>\
**Category:** Factual Questions\
**Created:** [May 30, 2006, 3:45pm UTC](https://boards.straightdope.com/t/cashing-out-a-401-k/358744 "2006-05-30T15:45:20Z")\
**Posts on this page:** 3\
**Page:** 2

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**Author:** ![iamthewalrus\_3](https://avatars.discourse-cdn.com/v4/letter/i/258eb7/32.png) [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)\
**Post date:** [May 31, 2006, 6:46pm UTC](https://boards.straightdope.com/t/cashing-out-a-401-k/358744/21 "2006-05-31T18:46:57Z")

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[QUOTE=Mr. Slant]  
For the record, my employer lets me put my money in “emerging market” mutual funds.  
I keep 30% of my investment in these.  
I see much more potential for growth in politically stable countries without running water and electricity than I do in the US market…  
[/QUOTE]  
I wasn’t commenting on whether US or foreign investments are better, I was speculating that, if the US doesn’t get more responsible about money, My tax rates in retirement may well be _higher_ than they are now. Which makes a Roth IRA (and possibly even a normal after-tax investment account) a better idea.

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**Author:** ![JohnM](https://avatars.discourse-cdn.com/v4/letter/j/848f3c/32.png) [@JohnM](https://boards.straightdope.com/u/JohnM)\
**Post date:** [May 31, 2006, 7:05pm UTC](https://boards.straightdope.com/t/cashing-out-a-401-k/358744/22 "2006-05-31T19:05:20Z")

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[QUOTE=Dewey Finn]  
The 401k loan is a good idea, but I believe the loan would have to be against the 401k at your current employer, and I think you’ll have to pay it back immediately if you leave your current job. I don’t think you can borrow against a 401k at a previous job.  
[/QUOTE]  
True, but if he rolls it over into his current 401K plan then it can be borrowed against. Most companies cap the loan amount at 50% of your plan balance, too. And yes, if you leave the company you either have to pay back the balance immediately, or it will be treated as an early distribution and you’ll be liable for tax and the 10% penalty.

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**Author:** ![Kalhoun](https://avatars.discourse-cdn.com/v4/letter/k/3bc359/32.png) [@Kalhoun](https://boards.straightdope.com/u/Kalhoun)\
**Post date:** [May 31, 2006, 7:45pm UTC](https://boards.straightdope.com/t/cashing-out-a-401-k/358744/23 "2006-05-31T19:45:12Z")

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[QUOTE=Shadowfyre]  
Let’s just say that I have about $30k in a former employer’s 401(k) plan. I know I can roll it over to my current employer’s plan, but I’m curious about the cashout option.

Looking at the website for the plan, it says that the federal government withholds 20%, and the state government (Illinois) doesn’t withhold anything.

So what’s going to happen April 15th of next year? I know Illinois is going to want their cut. Anyone have any idea how much I should set aside for Illinois? Are the feds going to want more? Does it depend on my overall income for this year?  
[/QUOTE]

I live in Illinois and cashed out a $13K 401k and it cost me about 30%. Please don’t do this. My ass is still hurtin’ from the kicking I’ve been giving it for the last 10 or so years. STUPID! STUPID!

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