It's hard to give you a definite answer, but generally, it is not advisable to cash out your 401k if not needed.
First of all, keep in mind that income taxes will apply, so you will not get the full $3,000 amount. Plus, if your husband is younger than 59 1/2 years old, he may also be subjected to a 10% penalty, on top of the income tax rates. So if there is no urgent need for the money, why do you want to pay 10% out of the pocket?
Plus, a 401k account is meant to be a reserve for your retirement. Depending on how soon your husband wants to retire, the $3,000 amount can grow over the years, on a tax-deferred basis, into a bigger sum later.
Now what if the reason he wants to cash it out is because he doesn't like the investment options and returns that the 401k offers? If he is no longer with the employer, you also have the option of rolling over the money into an IRA account with the investments that you like or with lower costs and fees.
WalletHub Answers is a free service that helps consumers access financial information. Information on WalletHub Answers is provided “as is” and should not be considered financial, legal or investment advice. WalletHub is not a financial advisor, law firm, “lawyer referral service,” or a substitute for a financial advisor, attorney, or law firm. You may want to hire a professional before making any decision. WalletHub does not endorse any particular contributors and cannot guarantee the quality or reliability of any information posted. The helpfulness of a financial advisor's answer is not indicative of future advisor performance.
WalletHub members have a wealth of knowledge to share, and we encourage everyone to do so while respecting our content guidelines
. Please keep in mind that editorial and user-generated content on this page is not reviewed or otherwise endorsed by any financial institution. In addition, it is not a financial institution’s responsibility to ensure all posts and questions are answered.