If you're enrolled in such a plan, money is automatically deducted from your paychecks and put into your account. Plan administrators use your money to invest in the funds you choose for your account. However, you can opt out of your plan.
Process
To opt out of your 401(k) plan, contact your plan administrator. Fill out the required forms to stop the payroll deductions from going to your retirement plan. The pretax deductions will stop.
Significance
The significance of opting out means that no more money is directed to your retirement account. Money already in your account remains there and may be invested in any way you choose.
Benefit
The benefit of opting out of a 401(k) plan is that you receive more money in your paycheck. This money may be used toward other investments or for any other purpose.
Disadvantage
The disadvantage to opting out of your 401(k) plan is that you won't be saving money for your retirement. This may force you to work longer in life than you may want to. You also can't withdraw money from your 401(k) plan without consequences.If you withdraw the money, you may lose any employer match. You also will be assessed a 10 percent penalty on any money you cash out before you are 59 and a half years old.
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