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Chapter 18. Cashing In or Out of Your 401(k) > Calling It Quits - Pg. 179

Cashing In or Out of Your 401(k) 179 We sound like a broken record here, but taxes will be due on the withdrawal and can consume a big chunk of it. Calling It Quits When you're separated (legalese for quitting or getting fired) from work, what happens to your 401(k)? Let's start with the positive. You just gave your notice because you got a new better-paying job with more benefits and a company car (hey, we can dream, can't we?). So what do you do after the going-away party? Head to the benefits department and check out your options. You may be able to leave your plan right where it is as long as you have a balance of more than $5,000. You should probably do that as an interim measure until you've had time to think about it. Your former employer can't boot you out of the plan simply because you are no longer an employee. However, they will not allow any new contributions or loans. You start your new job and during orientation, they give you lots of stuff to read about the company and your benefits, one of which is their 401(k) plan. Now that you've become such an expert on plans, you'll be able to whip through this SPD in no time at all. Transferring Your Old 401(k) into Your New Employer's Plan Scenario No. 1: You check, and sure enough they allow for transfers from former plans. You've now reviewed the investment choices, and you think they're pretty good also. You decide you want to make a transfer. Now what? The new plan will make it easy for you; you'll have to fill out some forms and they will contact your old plan and have your money transferred to the new plan. You may have to follow up with a phone call to see how things are moving along, but it should be a simple process. You don't want your former employer's plan trustee to send you a check directly if you can avoid it,