35 Retirement Planning Mistakes That Waste Your Money

Cashing Out Your 401ks Between Jobs

According to Fidelity Investments, the average cash-out amount of a person under 40 who is changing jobs is $14,300. Although cashing out your 401k might seem like a good idea if you need to solve a short-term financial crisis, doing so can have dire consequences.

For example, if you cash out or withdraw money from your 401k early — before age 59 1/2 — you could be hit with tax penalties. Along with any applicable federal and state income taxes, you could face a 10 percent early withdrawal penalty. Moreover, Fidelity reports that your 401k plan administrator will typically withhold 20 percent of your balance to cover the taxes. Opting to roll over your 401k is a much better option.