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Originally Posted by MTG#10
I talked about this a while back but need some clarification from the retirement plan experts here.
My company was bought out recently, so my existing 401k is being terminated. I've been given several options by some financial adviser that came over with the new company...rollover to a Roth and pay taxes, rollover to a traditional, or leave it where its at and it will automatically roll over to an American Funds IRA and invested into a money market fund.
I asked the guy about just straight cashing it out. I understand the tax implications since 401k's are pre-taxed, but other than tax there should be no other penalties assessed, correct? He strongly discouraged that choice and said there would be penalties on top of the tax.
I thought since the plan is being terminated and that is out of my control the cash-out penalties would be waived? We're not talking about a huge sum of money, this particular 401k has less than $20k.
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I believe you have to pay a 10% penalty on top of any taxes for an early withdrawal.
If it was me, I'd just roll it over, preferably into a Roth IRA. Tax free growth!