I have a small 401k account from an employer I left a year ago. I would like to close the account and cash it out to simplify my financial profile as well as use the money for some home improvements. I saw on their web site that there is an option of
Hardship Withdrawal, which has primary residence repairs option listed as a reason to choose from, among others.
Assuming I had a nominal $1000 in the account, what kind of penalties or early withdrawals can I expect upon tax filing for the year in which I withdraw and close the account?
The form also has an option to opt out of withdrawing 10% default federal tax. Considering that I will be paying taxes for this eventually upon filing taxes, are there any reasons not to opt out of paying taxes upon the withdrawal and pay it six months later when I do my taxes because paying it now vs. in the future means loaning money to the federal government at no interest? IOW, if I would eventually have to pay, say $200 of tax, I would rather pay $200 on 4/15/2016 rather than 10% now ($100) and then another $100 remaining balance later at tax time. Unless there are good reasons to pay the 10% now.