Employees can cash out a 401(k) retirement plan account by contacting the plan administrator for the account, as noted by Money Under 30. When the account is cashed out early, there will be a 10 percent penalty initiated the Internal Revenue Service on the amount being taken out.Continue Reading
The following steps should occur when cashing out of a 401(k) plan.
Consider the consequences of cashing out a 401(k) before doing so. If cashing out early, there is a penalty. An additional 20 percent will be removed to help cover taxes on the early withdrawal. Those who wait until they are at least 59 1/2 years old can cash out a 401(k) plan without these penalties. It may also be a good idea to just borrow what is needed from the account and pay it back within five years, notes the Financial Industry Regulatory Authority.
Find the plan administrator for the account. The administrator may work for the employer or be part of a separate management company. Their information is likely on some of the documentation provided for the retirement plan. Employees can also ask their employers for assistance.
The plan administrator will deduct any penalties from the amount in the 401(k) plan and mail out a check. Usually, those cashing out early will get about 70 percent of the amount in the account. This may not include any matching contributions from the employer, if the employee did not reach vested status in full before cashing out.