All About Pensions

5 Responses to “Can I Withdraw All Of The Money From My 401k?”

1. bdancer2 on February 9th, 2010 at 9:44 am

   Many plans won’t allow withdrawals while you are employed. Some plans allow loans. It really depends on the employer’s specific plan.
   As far as the government is concerned, early withdrawal of funds from a 401K or an IRA get a 10% penalty if you are under 59-1/2. You also have to pay the income taxes on the funds.
   If you leave an employer, it’s best to rollover the 401K into an IRA. That way you have more control and can keep better track of it. You can also pull money out, subject to the penalty and taxes.
   When you do get to retirement age, you can pull money out as you want — monthy, quarter, when you need it. There aren’t any specific rules as to how much and when.

2. doreen k on February 9th, 2010 at 2:30 pm

   As the others have correctly answered, you normally must terminate employment or encounter a hardship (typically medical) to withdraw money from your 401(k).
   However, they did not mention that if you retire at age 55 and take the distribution from your 401(k) at that time, you will not have to pay the 10% penalty for an early distribution.
   Once you are eligible to withdraw from your 401(k), you have the choice of taking all of the money at once (this is called a lump sum distribution) or taking partial distributions. You can apply your lump sum distribution as a direct rollover to an IRA or even another employer’s qualified retirement plan (if that employer allows that option). You also can take a lump sum distribution and manually roll it over by taking it to a financial institution or brokerage and depositing the proceeds within 60 days.
   It is best to take a lump distribution and do either a direct rollover or a manual rollover to an IRA and later take distributions. Plan administrators charge a lot of fees for 401(k) administration and most of these are taken net of earnings, so you have no way of knowing how much they’re taking in fees. You will pay a lot less in fees if you rollover the funds to an IRA instead of keeping it in the 401(k).
   Hypothetically speaking, your best option would be to take the lump sum distribution, do a direct rollover to an IRA and then take periodic distributions. Most IRA trustees/custodians allow monthly, quarterly or annual distributions.

3. feltfina on February 9th, 2010 at 3:37 pm

   its your money you can cash it out, but you will lose the unvested portion and also have to pay tax and penalties on the money. If you don’t absolutely need the money leave it in there and take a loan out against it. Call your 401k administrator for more details.

4. Anonymous on February 9th, 2010 at 7:49 pm

   There are two sets of rules: IRS’s and the plan sponsor’s.
   IRS says you can take it out but will owe tax and if you are under 59 1/2 you’ll also owe a 10% penalty.
   Most plan sponsors allow you to take out the funds when you terminate employment. A wise person rolls it over into an IRA. Others just pay IRS and pocket what is left.

5. the tax lady on February 9th, 2010 at 10:54 pm

   So, do you plan to quit or get fired?
   Short of a hardship distribution, you can’t get the money any other way. The plan will define the hardships they will consider–and these are few and far between.

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