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Asked 11/20/2006
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Penalties involved cashing out a 401k with an outstanding loan.? Arizona. I have about $39,000 total in my 401k. I have a 401k loan for $13,000. My income is $86,000. I am considering cashing in all my assets and moving to asia. What kind of penalties will I pay when I quit my job and remove the money from the 401k? |
Answer 1/2 - Submitted 11/20/2006
Unless you roll the money into an IRA - which defeats your purpose, you are going to lose A LOT of money to the government. There are penalties and exorbinant taxes on cashing out a 401K before you retire.
Call your broker and get the details - it could be almost 1/2 you'd lose.
FP
Answer 2/2 - Submitted 11/20/2006
If you cash out you'll pay a 10% penalty on the 39k. Plus the 39k will be taxed as regular income. The 13k loan would also be taxed as regular income and there may be a penalty on that also. So if your income is 86k, you'll now be in the $138k income tax bracket. I wouldn't do it. Roll it over into an IRA. You can still manage the IRA while overseas. Good luck!
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