10% is how much you might be penalized if you pull money from your 401(k) before you reach the age of 59 ½.
It can be tempting to raid your retirement fund – especially if you’re changing jobs. This is when you’re given several choices: a) you can move your 401(k) into your next employer’s plan; b) you can roll it over into an IRA at an investment firm of your own choice; or c) you can cash it out.
The problem is cashing out can be quite painful. First of all, you have the 10% penalty. Then you have to consider taxes – you may be responsible for both federal taxes as well as state taxes. By the time you add everything up, you can lose a significant chunk of your hard-earned dollars.
Equally problematic is the long-term damage to your retirement savings. Many people have every intention of catching back up, but the truth is it’s hard to do this once you cash out. And when you factor in the potential loss of being out of the stock market for any extended period of time, the problem is compounded even further.
Your retirement money is sacred. Protect it and nourish it so it can be there for you in your golden years.
The information on this page is provided for educational purposes only and is not tax, legal, financial planning or investment advice. Neither the information nor any opinion expressed in this section constitutes an offer to buy or sell any securities or advisory products. The information provided is general and is not information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular security. You should not regard this information as a substitute for the exercise of your own judgment. Investing involves risk.