Thread regarding Wells Fargo & Co. layoffs

Why are you cashing it out? Roll it over to an IRA if you’re leaving or retiring.

If you’re 55 or over you can withdraw from your 401k without penalty if you’re laid off. Otherwise you have to be 59.5 or older to withdraw without penalty. You’ll pay taxes on withdrawals from traditional 401k (eg non-Roth).

I am seeing some posts where people mention the 10% penalty if you withdraw under age 59.5 which is correct. However keep in mind that every single dollar you withdraw from a 401k is subject to income tax. If you have $500k in your 401k and you're 55 years old, you will first be hit with a $50,000 penalty.

However regardless of your age you will also get a 1099 for $500,000 of income, which depending on your starting bracket might end up causing you to get hit with $150,000 or so of federal income tax. Then, depending on your state, you might end up with perhaps another $35,000 of state income tax.

Add it up and that's $185,000 of regular income taxes even if you're over age 59.5 and $235,000 of total taxes if you're under age 59.5. There's virtually no instance in which you should ever withdraw the entire balance of a 401k. Roll it over into a Traditional IRA account to avoid all taxes.

If you still absolutely cannot come up with money by any other means, only withdraw the minimum amount you need every month. Don't lump sum like $50k for the year and lock in a boatload of taxes, because for all you know, you'll get a new job or find ways to cut expenses later in the year, but once you pull money out, you are stuck with paying all taxes and penalties and can never get the money back into the 401k / IRA.

do not do a 401k loan or cash it out, don't rob from your future self.

Keep in mind that 401k loans are paid with AFTER TAX DOLLARS from your paycheck (search 401k loans in Teamworks to see this info). So it results in double taxation of the money. You use after tax money to pay back the 401k loan and then when you later withdraw the 401k amount for normal retirement you pay income taxes again. Even if you are in the 15 percent tax bracket this really adds up and makes the loans very high cost. Please consider other alternatives of money if they are available.

Just make sure if you borrow against your 401k it has to be paid back in full within 5 years otherwise the whole amount is considered ordinary income for income tax purposes and you have to pay regular income tax on the whole amount. This happened to my neighbor.

You are only matched on your deposits for that year. So if you deposited 6% for this year Wells will match it.
If you cash out and are under 59 1/2 years you are subject to a 10% tax on the amount of the cash out. For this reason as @qus+1q1RbfSh says you should not do this. if you need money, consider getting a loan from Empower. However, if you get laid off, you must pay back this loan before it can be rolled over. I don't know what the current rates of these loans are.

"But once the check it made out to them, in their name, then they will get the penalty. "

You have 60 days to get that check made out to you into the new 401K or IRA. You won't get penalized during the 60 days.

Even if you manage to cash out your entire balance, the empower account will stay open and the match will be deposited.
However, you most likely will not be allowed to cash out as long as you remain employed

Let’s not read into the who what when where and why’s and just look at the ask.

If you are employed as of 12/15 and have an account open at Empower YES, WF will still give you whatever match you’re entitled to.

If you cash out and close your account before 12/15 of any given year then I would error on the side of caution and assume you would not get a match as there would be no account to deposit it into. But you would need to do some detective work with HR and the 401k Plan Administrator to see if there is any fine print where they could cut a paper check or deposit it to a different fiduciary. My money is on there being a requirement for the 401k to be open and in good standing At Empower only to get a match.

If you need the money asap for some reason find out the minimum balance to prevent any of excessive fees for a low balance, cash the rest out, wait for the match, then close it completely.

The company will continue to match if you're still contributing. In case you're not aware, rather than cash out your whole 401k, you can take a loan on it, penalty free if you pay it back in full.

@pim+1q1RbfSh I totally agree. Wish there was more input from the original poster so people can give them the best advice.
If they are moving to a new employer, then they could roll it over or keep it with existing company so they don't have the 10% penalty. But once the check it made out to them, in their name, then they will get the penalty. So if they don't know about rollover of 401K, they should look it up on the internet.

You never know what someone could be going through financially in life and sometimes a simple 10% penalty is worth it ex: if you can keep a kid in a divorce, need it for severe medical treatment, or just to be able to keep a roof over their head. Never assume.

If you don't contribute and take out your entire 401K, then the company will not contribute a match either. Besides why in the world would you want to take out your entire 401K (unless it's a real real emergency or you're about to die) cause if you're under a certain age (I think 50 or 55 or 59) they you will have a penalty of 10-15%. That means 10-15% less money. Beside, in 2024, unemployment will climb and perhaps you could be at risk of losing your job. Then how will you pay your bills. The reason 401K is there in the first place is so you can have a secure retirement when you get older cause social security may not be around or a lot less money from it. If I were you, I would not touch my 401k especially if I am able to pay my bills and have a job. You should think about this many many times before taking a penny out of your 401K if you are not at retirement age.