Home  >  Financial Articles and Q&A  >  If I am fully vested, quit my job and caah out my 401k...

If I am fully vested, quit my job and caah out my 401k will I receive the employer matching contributions if under 55?

I am wondering if staying the extra year to become vested is pointless if I will not be eligible to the employer matching contribution due to cashing out since I am only 30 years old?

Jun 21, 2014 by matthew from Las Vegas, NV in  |  Flag
5 Answers  |  6 Followers
Follow Question
1 vote

If you are vested you are entitled to the employer match, but please reconsider the cash out. Rather, rollover to your new employers plan or an IRA of your own. If you cash out you undo all of the good work you've done getting an early start saving, and that money will go to the IRS in the form of taxes and penalties instead of reaping compound growth for the next 30 years. DONT DO IT!

Comment   |  Flag   |  Jun 21, 2014 from Bridgewater, NJ

1|600 characters needed characters left
1 vote

Matthew - you need to get a copy of your company's 401k plan "Summary Plan Description" and review it with someone in the Benefits Department or even call the Third Party Administrator. It is not uncommon for some plan sponsors to only match contributions if you are employed on the last day of the plan year, and under that condition you would not receive a match for the year in which you quit unless it was on that last day.

Comment   |  Flag   |  Jun 24, 2014 from Richmond, VA

1|600 characters needed characters left
0 votes

I'm a bit confused by your question. In the title, you say you are fully vested. In the description below, you state that you're wondering if you should stay the extra year to become vested. Thus, you're either fully vested, or you're not. Before rendering any suggestions to you, it would be helpful to both of us to know... Best Regards, Rod

1 Comment   |  Flag   |  Jun 21, 2014 from Springfield, MO
Colin

I agree with Rod...your title and then the accompanying description are contradictory...if you're vested and cash out, you get what you contributed plus the employer's contributions. If you need to wait another year to become vested but elect to quit and cash out instead, you only get what you contributed. Cashing out, regardless of whether you're vested or not, is a bad idea though...either leave it in your current 401, roll it over into your next employer's plan (once you have a new job) or roll it into your own IRA. Depending on your balance in your existing employers' 401, you may have to move the money out of the plan when you leave regardless but generally if you have over $5000, you can keep it in the existing plan until you decide what to do with it.

Flag |  Jun 23, 2014 near Oak Creek, WI

1|600 characters needed characters left
0 votes

Matthew, the amount you personally contributed is always yours and you can take it out when you leave. A good advisor will always suggest a tax-free rollover to an IRA rather than giving part of it to the government via taxes and a penalty. If your employer matched a percentage of your contribution, they may require you to work for a certain number of years (no more than 6) before you are fully vested in the employer match. Check with your employer’s benefits department to see what the rules are.

View all 4 Comments   |  Flag   |  Jun 23, 2014 from Suffolk, VA
Colin

My only guess is that perhaps there was some confusion about the penalties but this applies to withdrawals taken before you're 59 1/2, not 55.

Flag |  Jun 23, 2014 near Oak Creek, WI
James D. Kinney, CFP®

For other people following question - this is why it is important to fund an emergency reserve fund. Yes it is important to save for retirement, but locking money in retirement savings is counterproductive if you have so little available (non retirement) savings that you need to raid the piggy bank (and fork over a huge share of YOUR savings to the government) when life throws you a minor curve ball. .

Flag |  Jun 23, 2014 near Bridgewater, NJ

1|600 characters needed characters left
0 votes

Matthew,

As I understand your question you are trying to decide whether it is worth it to stick around another year until you vest. Your concern is if you will lose matching funds if you are vested and younger than a certain age. The short answer is once you are fully vested, the funds belong to you regardless of your age.

What you do with your 401(k) plan funds if/when you leave the company is another issue...but I wouldn't "cash out". Rolling it over to another tax advantaged fund (IRA, 401(k), 403(b), TSP) is a better option.

Comment   |  Flag   |  Jun 23, 2014 from Alexandria, VA

1|600 characters needed characters left