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How do I draw my 401k out in full?

Jun 03, 2015 by LaTesa in  |  Flag
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2 votes

There are many things to consider when effecting a withdrawal from your 401(k) plan; your plan administrator can provide you the necessary forms, but I would consult with a Financial Planner to ensure you make the right choice.

Best of luck.

Comment   |  Flag   |  Jun 05, 2015

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Contact the Plan Administrator and ask them for the necessary forms to effect whatever type withdrawal you want to have done, i.e. - full taxable withdrawal, transfer to IRA, etc...

Comment   |  Flag   |  Jun 03, 2015 from Canton, GA

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James Harold Lee Level 14

Contact your plan administrator. If in doubt, check your most recent statement, which should have a phone number or website information. Before you draw out your 401k in full though, you may want to ask yourself a few questions:

1) Should I roll this over into an IRA with another service provider? (This will help avoid taxable distributions) 2) Am I over the age of 59 1/2? (To avoid early withdrawal penalty) 3) How much can I withdraw before triggering tax consequences? (In particular, you will want to avoid going into a higher tax bracket as a result of a withdrawal). 4) Is a loan option available for my 401k plan, and would this make more sense?

This is an ideal time to consult with a certified financial planner.

Comment   |  Flag   |  Jun 07, 2015

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Do you have a hardship event? Contact your human resources director and as what their criteria for withdrawal. Before you do that contact a fiduciary adviser to determine if this is your best course of action.

Tony

Comment   |  Flag   |  Jun 09, 2015 from Green Bay, WI

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Michael Baker Level 7

LaTesa

It's important to determine if you're looking to draw the money from your 401(k), which triggers taxes; or if you're looking to roll those assets into another account (new employer plan, or IRA), which is not taxable when done properly.

In either case you'll want to call the phone number on your most recent statement from the 401(k) plan, or contact your HR department to inquire about what is required to liquidate/transfer your account.

Assuming you want to avoid paying taxes by rolling the assets into an Individual Retirement Account, you'd first want to establish an IRA to receive the rollover. Once you've done this, you'll want to ensure that the assets from the 401(k) are transferred directly to the IRA custodian (Charles Schwab, TD Ameritrade, etc.) which the 401(k) plan administrator will assist you with. If you take possession of the assets at any point you may end up owning taxes on the distribution.

From there, the assets should transfer electronically from your 401(k) to your IRA in most instances. This method prevents you from having to pay taxes on the distribution from your 401(k).

As others have said there are several alternatives to this method, but this is probably the most common option.

Financial Advisors can often help facilitate this transfer, and they'll be there to help you develop a game plan for your investment portfolio once the assets have transferred.

Good luck!

Comment   |  Flag   |  Jun 09, 2015

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Several correct answers already, but your current status as an employee or prior employee is important as well. If you are still employed, and need the funds now (ie, not a rollover situation) there are two options, a hardship distro (most people's needs do not reach the standard set by the IRS or the plan specific requirements, but if you have a real NEED you can check those out), or your plan may allow for an in-service distribution assuming you are above a certain age, usually 59.5 yrs. Any distro that is not rolled into another tax deferred vehicle will be taxable to you as ordinary income, and if you are not 59.5 or older, you'll be assessed another 10% penalty when you file your tax return.

If you are no longer an employee, you can take it as cash and pay taxes, or you can roll it into another plan or account. (The in-service distro can also be rolled into another IRA, if that matters). Bottom line, you need to get with your administrator and see what your plan rules are.

Comment   |  Flag   |  Jun 09, 2015 from El Paso, TX

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