Since I am not sure if you are referring to taking cash from your 401(k) or a Cash Balance Retirement Plan (a Defined Benefit Plan) I will give you the basics rules. Whether or not you are still employed at the company is a factor too. As for taking a distribution from either type of plan, without penalties, only applies if you are 59 1/2 years of age or older. Depending on your age you may be subject to a 10% early withdrawal penalty in addition to taxes. The only exceptions to the 10% early withdrawal penalty on taxable distributions for someone under the age of 59 1/2 are death, disability, divorce, annuity payments over expected lifetime, Roth conversions, IRS levy, return of excess contributions or age 55 with separation from service. It is important to check the Summary Plan Description for your retirement plan to determine your exact distribution options. If you are eligible to take a distribution, your best option may be to do a rollover to an IRA and continue saving. If you would like to discuss your specific situation you can call our office for guidance.
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Chris, you can find out the age at which you can take a penalty-free distribution from your cash balance plan by contacting your employer (or former employer). The ones I'm familiar with allow you to take distributions at age 55 without penalty, but that differs from what David says above. However, even after you reach the penalty-free age you'll still have to pay ordinary income taxes on the distributed amount if you take a withdrawal. If you roll the cash balance plan into an IRA, you will avoid both taxes and penalties. With cash balance plans, it's also important to find out how much you'll really get when taking a distribution. Your "lump sum" amount can differ greatly from your "benefit amount" depending on your age and the number of years spent with your employer. So you'll want to be sure to talk with someone in your HR department about the actual amount you can take.
Chris, the penalty applies if you withdraw pre 59 1/2. There are other options of rolling it into an IRA if you are younger than that. However, if you are still employed by the company that offers the cash balance plan, they will likely have rules that say it cannot be touched until the age of retirement, usually 65.