If you cash out $50,000 in your 401(k) when changing jobs,what will you need to pay?
$5,000 early-withdrawal penalty and $10,000 federal income tax withholding
15% federal income tax withholding and 5% early withdrawal penalty
Income taxes
Nothing

Question

Quizplus · Accepted Answer

When cashing out $50,000 in your 401(k) when changing jobs, you will have to pay income taxes, which will depend on your tax bracket. In addition, you will also be subject to an early-withdrawal penalty of 10% by the IRS, resulting in a $5,000 fee. However, there is no 5% early withdrawal penalty, and the federal income tax withholding rate is generally 20%, not 5%. Therefore, options II and III are incorrect. Option IV is also incorrect because you will need to pay income taxes on the amount withdrawn. Therefore, the best choices are I and III.

If You Cash Out $50,000 in Your 401(k) When Changing