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Why Most People Cash Out Their 401(k) | Durham News
When you leave a job, your 401(k) options matter more than you think—most people grab the cash, but that’s a tax and penalty trap if you’re under 59½. You’ve got four choices: leave it where it is, roll it into a new plan, transfer to an IRA, or take cash. The first three keep your money tax-deferred and penalty-free. But cashing out? That triggers income tax plus a 10% federal penalty. Surprisingly, hourly workers are twice as likely to cash out—often due to cash flow gaps. And if you get a direct rollover check, the IRS withholds 20% for taxes—even if you plan to roll it over within 60…
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