- 1). Speak to the benefits administrator at your old company and obtain any forms needed to cash out your 401(k). Each company has its own process for cashing out a 401(k) and your benefits administrator or human resources department can guide you.
- 2). Decide how much of your 401(k) to cash out. It's possible to cash out part of a 401(k) and leave the rest invested. The smaller the amount of money you remove from your account, the less you owe in taxes.
- 3). Calculate your total disbursement. The federal government levies a mandatory 10 percent penalty on cashing out a 401(k) before the age of 59 1/2, plus a mandatory 20 percent fee held against your federal income tax. Your state may also levy a penalty for early withdrawal and charge tax on the cash-out amount. Calculate your withdrawal based on the amount of money you receive after these fees.
- 4). Fill out the forms provided by your benefits administrator indicating how much of your 401(k) to cash out and where the funds will be sent. Many companies offer the option of having the funds transferred to your bank account electronically; other companies only offer the funds as a check. Confirm how your funds will be disbursed on the paperwork and return the completed form to your benefits administrator.
- 5). Administer the remaining 401(k), if any. You have 60 days from the start of your new job to move your remaining 401(k) into a qualified plan such as your new employer's 401(k) or an IRA.
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