The 30% penalty is BOGUS. There is no such thing.
If you cash the account in, they will automatically withhold 20%. Because you are under age 59.5, there will be a 10% early withdrawal penalty. If you don't make much money, your tax liability will be significantly less than 20%.
In this case 20 + (ten)10 DOES NOT equal 30. Whatever you over paid in withholding, you'll get back next year when you file your taxes.
If the money is pre-tax (most likely) then your only option (to keep to tax deferral going) is to roll it into a traditional IRA or your current employer's plan.
Don't get confused by the "types" of IRA's. There are only 2: Traditional and Roth. Traditional keeps your money as it is (pre-tax). A Roth may have its advantages but that is a whole seperate discussion.
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