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How can I withdraw from my 401k plan?

I work for Highland baking Co.

Mar 15, 2015 by vicente in  |  Flag
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Hi Vicente. I highly recommend that you contact your company's HR department and/or the plan sponsor, as they can provide the specifics about your companies plan.

If you are still an employee of the company sponsoring the 401K, you are likely limited on your ability to outright withdraw from your 401k. Your plan may allow for hardship withdrawals, but you need to have a qualifying hardship. If your plan has a loan feature, this may be a better option than a withdrawal. Loans are genuinely limited to 50% of the value of the account, and must be repaid. Payments will likely be deducted from your pay check until paid off on a schedule, or you can make a lump sum payment to pay off the loan.

In-service withdrawals may be an option. Your plan has to allow for this option. It is typically subject to a minimum age (usually 59 1/2), and/or a length of service requirement. Most plans require spousal consent. Withdrawals are taxable as ordinary income, and a 10% early penalty tax will be assessed if you have not reached the age of 59 1/2. If this withdrawal is rolled directly to an IRA account tax deferral can continue.

Remember 401K assets are intended for your retirement. If these fund are withdrawn before you are ready to retire, this could be detrimental to a healthy retirement. Careful consideration and planning should be taken before withdrawing 401k assets, or taking a loan. .

Comment   |  Flag   |  Mar 17, 2015

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Bryan J Bentley Level 9

Vicente - if you are still employed by Highland Baking Co., then there are typically 2 options for getting money out of your 401k. The first option is by taking a loan from the account. You will be limited by the plan as to the loan amount, usually 50% of the balance or a set dollar amount, and you will be required to pay it back (you will be paying yourself) with interest.

The second option is known as an in-service withdrawal and it is typically used to take funds out of a 401k and put them in another tax-qualified account, such as an IRA, to take advantage of investment options that are not available in the 401k plan.

Comment   |  Flag   |  Mar 16, 2015 from Granite Bay, CA

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