When you leave a job, the vested benefits in your retirement plans are an enticing source of money. It may be difficult to resist the urge to take the money as cash, particularly if retirement is many years away. But generally you will have to pay federal income taxes, state income taxes (if applicable) and a 10% penalty if you are under age 55. This can cut into your investment significantly. If your state income tax is 7.5%, for example, someone in the 25% federal tax bracket would loose 42.5% of the amount he or she took.

25.0% (Federal Tax)
7.5% (State Tax)
10.0% (Penalty)
42.5% (Total Tax and Penalty)

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The information presented is general in nature and should not be considered legal or tax advice. You should consult your legal or tax advisor for information concerning your own specific tax situation.