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Marino on Money: June 4

READ MORE: Marino on Money: June 4
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If you've changed jobs or lost your job recently, you probably have questions and concerns about your 401 (k) plan. Today, Ross Marino talks about cashing out and rolling over. This week I discussed what to do with a 401(k) after you leave a job. If your balance is less than $1,000, your employer has the option of cashing it in for you. If you have between $1,000 and $5,000, they can roll it over to an IRA. In all situations, this is only done if you do not tell them what you want. It is your money, so take control and make the decision. If you roll it over, or transfer it to another retirement account, you should be able to avoid all taxes. As always, seek advice from a tax professional first. Cashing it in is always an option. Probably not the best option, but it's an option. Taxes and penalties may cost you over 50%. Even in lower tax brackets, it may cost you one-third of the value. Ouch. Even worse, it may take years to replace that money in another saving account. One final consideration is loans against a 401(k). If you leave your employer, you may be forced to pay back the loan. You may also be required to pay back the loan before you try and roll it over. But that isn't the worst part. If you cash in your 401(k), and you have a loan balance, the value of the loan becomes a taxable distribution. Meaning, you may owe taxes and penalties on the value of your 401(k) and the value of the loan. As I stated before, cashing in 401(k) is often the most expensive place to get money. Whether you are borrowing against it, or cashing it in, I would make it the last option I consider. It may be convenient, but as always, convenience has a cost.

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