A quick clarification for a couple readers asking whether you can cash out your 401(k) and take a cash dispersal. The quick answer is no, not anytime.
If you have left an employer where you had a 401(k), you can cash out that 401(k) anytime, but that withdrawal will be subject to 20% federal income taxes and the 10% penalty if you cash out before age 59 ½.
You cannot take a cash 401(k) withdrawal while you are currently working for the employer that sponsors the 401(k) unless you have a major hardship. You can cash out your 401(k) before age 59 ½ without paying the 10% penalty if:
- You become completely and permanently disabled
- Your incur medical expenses that exceed 7.5% of your gross income
- A court of law orders you to give the funds to your divorced spouse, a child, or a dependent
- You retire early in the same year you turn 55 or later
- You are permanently laid off, terminated, quit, or retired and have established a payment schedule of regular withdrawals in equal amounts of the rest of your expected natural life.
Additionally, you can cash out your 401(k) and pay the 10% penalty if you need funds for certain financial hardships and have no other source of funds. These hardships include:
- The purchase of your primary home
- Higher education tuition, room and board and fees for the next twelve months for you, your spouse, your dependents or children
- To prevent eviction from your home or foreclosure on your primary residence
- Tax-deductible medical expenses that are not reimbursed for you, your spouse or your dependents
- Other severe financial hardship
Even if you meet these requirements, cashing out your 401(k) should always be seen as an absolute last resort.



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I am 59 1/2 and surely I can take the money= how much at a time? could i take it all (rather devalued now) and invest it personally and then pay long term capital gains on all future gains. It it stays in the 401k and recovers, the the gains will be taxed as ordinary income as i take it out. I haven’t done the arrithmetic, but it seems that ignoring problems like minimum tax calculations. taking it out an paying tax now will be about equal to letting it ride=unless I throw i state tax which doesn’t recognize long term gains. Tough Question
Assume a buck in the 401k will double in 5 years? Do I take it out now or wait. I take it now and pay 30%fed tax on ordinary income and 10% state so I hav 60 cents that doubles to $1.20 On that I pay 15% long term gains abd 10% state so I’m left with 90 cents. Assumption two-let it ride in the 401k. It doubles from a buck to 2 bucks-I take it out and pay 30% fed and 10% state and end up with $1.20- loooks like leaving it in is the right way to go. Well?
i was recently terminated and have no way to pay my mortage,and i and i need to cash in my 401k now, but keep getting the runaround.
iam 27 yrs old have a second baby and quit my job cause i couldent afford daycare. i was wondering if its a good idea to cash out my 401k its not much its only 1300.00 is it worth it any ideas? im confused dont know much about 401k
While you did seperate from the employer and can take out the 1300.00, you will be subject to 20% federal income taxes and the 10% penalty if you cash out before age 59 ½. This would leave you with roughly 910.00. If it were me and I had no job and a child to take care of I would take the 910.00, seeing how it is not that much. However, if it were a more substantial amount such as lets say 40k, then after taxes it would be 28000, having to pay back 12k in taxes. That would be something worth considering.
I RECENTLY FOUND OUT I HAVE BREAST CANCER & NEED TO HAVE EMERGENCY SURGERY SO I TRIED TO GET A HARDSHIP LOAN FROM MY 401K & IT WOULD NOT LET ME EVEN AFTER I PROVIDED ALL NECESSARY DOCUMENTATION! I GOT THE THE RUN AROUND! FINALLY MY PARENTS FOOTED THE HOSPITAL BILLS! HOW CAN A PERSON’S LIFE BE LESS IMPORTANT THAN A COMPANY MAKING MONEY! THE COMPANY I WORK FOR THEN FIRED ME FOR BEING SICK IN THE HOSPITAL FOR TOO MANY DAYS! SO I TOOK THEM TO COURT & I WON & THEY WERE ORDERED TO PAY ME IN THE MILLIONS PLUS HOSPITAL BILLS PLUS MY 401K! SO THEY ENDED UP LOOSING MORE MONEY THAN THEY REALLY HAD TO IF THEY WOULD! THEY SHOULD JUST HAVE GIVEN ME MY 401K INSTEAD OF BEING SO GREEDY & THEY WOULD HAVE SAVED!