I realize that if I "cashed out" on a 401K early, I end up having to pay taxes on the cashed out 401K savings. But, I would have had to pay taxes on that 401K amount if I had not put into savings anyway.
In addition, say my company matches up to 5% of my 401K. Then I put in up to 5% of my earnings into the 401K, and the company matches. I do this for a few years, and then withdraw the full amount in the savings.
I do get taxed on the entire amount, but I've gotten an additional 5% (minus taxes) in addition to my salary base. Is my understanding correct? Is there anything I'm missing here?