The mysteries of 401k savings are little understood by most people, yet they are an important part of personal finance in the USA.

A big question, often asked, is what happens to their 401k savings when they quit working. The reality is, not many people work in the same job for an entire lifetime. When you quit working, you have some options.

First, you can cash out. This is probably not your best option, but it’s your money. You can have the plan send you a check, and you can spend it as you please. Note that you’ll only get a check for 80% of your money in the plan — the other 20% goes directly to the IRS as a down payment on your taxes. They figure you’ll owe them at least that much. If it turns out you owe less, you may get it back as a refund.

Next, you could leave the money in the 401k plan. Your account balance often has to be above $5,000 to do this, but some smaller employers will let you hang around even if you have a smaller balance. Depending on how much you like the plan, this might be a good option. However, you’re leaving your retirement savings in somebody else’s hands — your former employer’s. They decide which investment company handles the money, and they have to sign off on any distributions from the plan. This can make it tough to get anybody to do anything if you ever want to do something with your money – you have to wait for several people to sign off.

Finally, you can roll your savings over to another similar account. If your new job has a 401k or 403b, these might work. Likewise, you could just roll the money into an IRA, where there will be no employer involved at all. By taking the money with you, you keep control over it. The only drawback to this option is that you actually have to take action and make some decisions on what to do with the money.

Of course, you’ll find that tax laws around these accounts change every day. Therefore, you ought to speak with a tax advisor and get some individualized input on what to do before you make any expensive mistakes.

Does early retirement appeal to you? Are you counting on your Social Security benefits as all or part of your retirement income? Then understanding the effect that early retirement has on your benefits is essential.

Regardless of what year you were born, you can retire at age 62 and receive Social Security benefits. But your full retirement age is determined by your year of birth and taking retirement before your full retirement age will reduce your benefits for every month between 62 and full retirement.

For instance, if you were born in 1944, your normal, or full retirement age is 66. If you retire this year at 62, you will retire 48 months early. You would suffer a 25% reduction in your monthly benefit. If your monthly benefit would have been $1000 at age 66, it will be reduced to $750 due to collecting your benefits before your full retirement age. In planning for early retirement, these reductions need to be calculated and considered carefully.

To figure the reduction that would be applied to you, see the chart at the Retirement Planner at the Social Security Administration’s website.