For example, if you cash out a $100,000 account, you stand to lose $10,000 to the government for the early withdrawal penalty, plus income taxes ranging from 10% to 37%, depending on your tax bracket. Your $100,000 safety cushion could turn out to be worth less than $60,000.
There's also the issue of compound earnings. One advantage of 401(k) accounts is that your investments typically make money over time, which adds to the amounts contributed both by you and your employer. As your savings increase over time, your earnings are reinvested and earn money, as well. The gains from long-term 401(k) plans can often become a significant part of the total account.