Across My Desk: 401(k) Cash-Out Calculator

One of the mysteries of life guaranteed to confuse anyone who has been able to amass a small fortune for their retirement years is trying to figure out how much to take from a 401(k) when you reach retirement age. Or, if you need to tap that account ahead of time.

Below are bits and pieces from Money Management Executive and SourceMedia story, published on July 23, 2008, at mmexecutive.com, about a free calculator designed to help investors calculate how much taking money from your 401 (k) really amounts to:

"To show workers the long-term impact of cashing out their 401(k) savings when they change jobs or retire, a firm that provides rollover services for plan sponsors now offers a free "Cash-Out Calculator."

The Charlotte, N.C-based RolloverSystems Inc. makes the calculator available at rolloversystems.com. The calculator is able to demonstrate, for instance, that withdrawing a few thousand dollars today can diminish long-term savings by tens of thousands of dollars, as a result of taxes, penalties, and loss of compounding.

"Our calculator helps 401(k) plan participants see into the future and decide whether it's really worth sacrificing retirement readiness for current cash," said Jim Langenwalter, the company's chief sales and marketing officer.

After a person enters his or her current age, projected retirement age, expected rate of investment return, and current plan balance into the calculator, it shows how much of their withdrawal will be left after penalties and taxes and what the account might be worth at retirement had he or she not taken the withdrawal.

Experts say as many as 45% of plan participants who leave their companies cash out their 401(k) accounts. The number of cash-outs has increased during the current economic downturn...Loans from 401(k) savings are also rising."

Check it out. Tough times call for tough actions.