Cashing in my retirement fund?

Question

Here's the deal I just gave my two weeks notice at work I have been there a bout 1.5, I am 22 and I almost done with school. This was a job to get me through school on of the perks was a retirement fund that has now reached about 3000 dollars. I am aloud to cash it out 3 months after separation. My question in how much am I going to pay in penalties?

Answer 1

I would leave it in, but since you are asking for penalties, you will pay a 10% penalty, plus your regular income tax on top of that .  How much you pay depends on which tax bracket you are in.  Be sure that federal taxes are withheld so you are not penalized further by not withholding enough taxes.  It sounds like you are probably in the 15% bracket, so this would mean paying 25% total in taxes in penalties, if you happen to be in 25% bracket, that would mean paying 35%.  Personally I would transfer it to an IRA and put it in a long term fund that is retirement year based, then forget about touching it for 40 years. Let your money work for you.

Answer 2

Ashley, why cash out now? Do you enjoy paying penalties? Or are you looking forward to working until you drop because you cannot afford to retire when you are 65?

Answer 3

My opinion is that you should just keep it there. Your twenties are the time when you should start making that retirement fund. If you don't teach yourself to save now you never will you'll just keep saying "Oh I can cash it out now, I'll get it back later." I strongly suggest you leave it alone, let it grow and grow and grow and when your old and tired of the work force you can retire and do whatever you want with your life, you will have financial freedom.

Answer 4

True it's only $3k... After penalties and taxes you will bring home $1800 or less. And $3k allocated on the correct investment that will be worth only $48k+ by the time you are 48 and $96k at 54. I would take the $48k at 48,or the $96k at 54, but it is your money.