Here’s another sign that, while the economy is generally improving, flush times can still be elusive for individuals. Fully 35% of people who voluntarily or involuntarily left their jobs last year cashed out their retirement savings instead of keeping their money in tax-advantaged accounts.
The cash-out stat comes from Fidelity Investments, which regularly tracks the transaction trends of 12.5 million workers who have 401(k) plans administered by the company.
Advice: Every HR pro will eventually have an employee ask about cashing out a retirement account. While it’s unethical for you to provide financial advice, you can point out that such a move carries significant tax penalties. In the case of 401(k)s, distributions count as taxable income for the year in which they are made—plus a 10% additional tax penalty if the account holder is under age 59½.