Penalty for Cashing in a 401k Early

Series Summary

Everyone dreams of the day they retire. When is a good time to start saving for the future? How about yesterday. A secure financial future requires all the right investments, paying attention to retirement account portfolios and an avoidance of high-risk investments with an Individual Retirement Account as they get older. Some of the safer ways to save money include investing in U.S. savings and treasury bonds. Unfortunately though, saving money comes down to being able to have discretionary income at the end of each pay period. It can be painful, but it can be done. In this free video series on finance and investments, let a registered financial consultant explain how to properly invest money and get the best return on financial matters. Learn about 401k retirement accounts, different types of pensions, the new bankruptcy laws and investing in bonds. Discover ways to keep track of personal finances through budgets, to become a financial planner, to get a home equity loan and allowable IRA contributions. Finally, find out about different types of IRAs available, how the market value of gold is determined and short term loan possibilities for bankruptcy filers.

Video Transcript

"This is Patrick Munro discussing what is the penalty for cashing in a 401K early. A 401k is a governmental retirement program designed to allow working employees to put away money for retirement and not pay any taxes on the growth of that money. It's a privilege to have a 401k, the government grants you the privilege and if you don't have to pay taxes on the money, it will grow even quicker. However some individuals have, basically have problems with their cash flow and they have to collapse their investment. And if they do so before the age of fifty nine and a half, the government then will give you a penalty upon your money for the withdrawal. It's based on your taxable rate as well as a pure ten percent penalty over and above what you take out. So it's a very large penalty and definitely not want to tap your 401k as an emergency cash resource, because it will not only put your retirement funds back but it will actually cause you to lose money. So that's very important as to make sure you build money for your retirement future. This is financial adviser Patrick Munro talking about the penalties of withdrawing your money from a 401k early."