Liquidating an old 401k

Posted by / 20-Nov-2016 05:03

Let’s assume that you are 30-years-old and you plan to retire at 65-year-old.

At just a modest 3% annual growth rate, that ,000 would grow to ,069 by the time you retire.

Whenever you liquidate a small portfolio or convert the stock to cash, it has financial consequences.

For example, you may be taxed on capital gains or lose the portfolio's future appreciation.

In certain circumstances, the plan administrator must obtain your consent before making a distribution.

Generally, if your account balance exceeds ,000, the plan administrator must obtain your consent before making a distribution.

In addition, if your shares don't trade frequently or the shares were issued by a private company, get advice about liquidating your portfolio from one or more brokers.

When you look at your stock portfolio, make note of the number of shares you own of each company's stock and their current value.

Question: How much is your 401k taxed when you liquidate it? Answer: The 401k withdrawal would be taxed at your ordinary income rate, which will vary depending on your income, plus there’s an additional 10% penalty.

I am leaving a company and I have ,000 in my 401(k). Assuming you are 25% tax bracket, you’ll receive a net of ,250.

But when you take a distribution from your IRA, 401(k) or another retirement savings plan, you must generally include it as taxable income.

The withdrawal may also be subject to an additional penalty tax of 10 or even 25 percent.

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Here is their pitch line “avoid taxes now by investing in your future.” What this should say is, “avoid taxes now and lose control of your money for the remainder of your life.” Just leave it to them, because it’s their money anyways.