How to avoid penalty for 401k payout

[hef_a_roni]

What is the name of your state (only U.S. law)? Arizona

Hi,

I ended my employment with with my previous employer and they cashed out my 401k. The amount is only around $700. I still have the check in hand as I have been afraid to cash it as I know there are penalties for early withdrawl.
I didn't tell them to cash out my 401k they just did it. I recieved the check 1/12/09 so this will affect my taxes for 2009 (filed in 2010) but to avoid hurting myself financially in the future I am wondering where, legally of course, I can put this money to avoid penalties. I would prefer not to stick it in my current employers 401k as I have stopped contributing due to the economy down turn and HUGE loss of money in that account. I really can't afford to continue to throw away money
Can I by any chance put it in a CD or an account similar to that?

Thanks so much for you help,

Heather

 

[TinkerBelleLuvr]

You need to run, dash, move quickly to get that check into an IRA, like YESTERDAY. You had 60 days to move it before it became taxable income.

It needs to go into an IRA at this point to avoid the penalties, but depending on the date, you may have gone past the 60 days.

 

[cbg]

Since you had only $700 they could legally cash it out, particularly if they had sent you options for moving it and received no instructions from you.

 

[Beth3]

Employers may make forced distributions of terminated employees' 401(k) funds if the total vested dollar amount is under a certain level. ($5,000 last time I checked but it may have changed.)

Go to your bank immediately, open an IRA, and rollover the funds if you want to avoid taxes and an early withdrawal penalty. Hopefully, it's not too late.