Expert: Ed McFarland - 10/7/2004

Question
Hello,
I am a former employee of a company which I was fully vested within the time frame I was there. once my employment ended two months went by and I received a letter from my 401k stating my termination of employment and the option to cash out my balance or hold it until my retirement age of 50.  I am currently 26 years of age and in my current financial situation the cash out option would help me greatly to support my family, I know cashing out is not recommended, but I have no other way to catch up and get myself out of this hole I have dug for myself.  my question is this, I have contacted my former company's 401k handler and advised them I want to take advantage of the cash out option, that was on 9/23.. They advised me that the application to choose this option will be mailed out 10/1 and it was (received and sent back by over night fedex 10/7), but I need to know how long is the turn around time before I would receive my payment? they advised me could take up to 30 days for the application process to be completed, then the check would not be mailed out to me until after 12/1. Is this true? And why would it have to take that long, Is there any way I can speed up this process?

Thanks

Answer
Go and read the plan document. The information is there and what the rep told you accurate.

This is not unusual type of time arrangement, it's a retirement plan, not a savings plan. There is no way to speed it up.

You realize that you are going to have 20% withheld, plus a 10% surcharge penalty on the whole amount. It will get added to your taxes this year as ordinary income.

Sorry I can't give you a better outlook.