It typically takes around one to two weeks to get cash from your 401(k), though it can take considerably longer. The countdown starts when you request your payout and ends when you actually receive the cash, either as a check or a bank deposit. Cashing a 401(k) has tax implications, so you're not likely to get the entire balance. Most account administrators withhold federal income taxes, and some withhold state taxes. If you're under age 59-1/2, you may also have to pay an early withdrawal penalty.
Contact Your Plan Administrator
To cash out your 401(k), you must first contact your plan administrator — typically a brokerage firm, financial institution or mutual fund company. Contact details appear on your annual 401(k) statement. You can also find out who administers your plan from the human resources department of the employer that sponsors it. Ask the administrator what forms you'll need and whether you can get them online or make your request online.
Fill Out a Request Form
You must typically fill out a request form and send it to the administrator by mail or delivery service. You can deliver the form in person if you live near an office of the administrator. If you have online access to your account, you may be able to make your request online. Mail or delivery service may add one to three days to the payout timeline, depending on what service you choose.
Getting Your Payment
Once the administrator has your request, federal law allows the administrator three business days to settle the sale of most securities, including stocks, bonds and mutual funds purchased through a brokerage. The count starts on the next business day after you make your request. The administrator doesn't necessarily issue payment on the same day it sells your investments, however. The law requires "prompt" payment without specifying a particular time frame. Wells Fargo states that you'll typically receive a 401(k) check in the mail "a few weeks" after making the request; other providers may be slower or faster. Ask when you can expect to receive your payment and if possible, link a bank account to your 401(k) so you can receive funds quicker by electronic means.
How Much You'll Get
After the administrator withholds 20 percent for federal taxes, you'll get 80 percent of your account balance, or $8,000 of a $10,000 account, for example. If you're in a higher tax bracket, you may owe more on this withdrawal when you actually file. You'll also pay an early-withdrawal penalty of 10 percent if you're under age 59-1/2 and don't qualify for an exception. For example, you don't have to pay the penalty if you're older than 55 and no longer working for the employer that sponsors the plan. At any age, you can avoid the penalty in some emergency situations, for example, if you lose your job, become disabled or incur extreme medical expenses. If you must pay a 10 percent penalty in addition to 20 percent in taxes, you'll only receive 70 percent of your account balance. For example, a $10,000 account will net only $7,000.