401k Withdrawal Options

What are your 401k withdrawal options? The 401k withdrawal guidelines kind of depend on how old you are. If you are still under the age of 59 ½ it is not going to be easy.

If you want or need to get money out early, here are all the ways to do it.

Under 59 ½

If you are under 59 ½ your first option is to simply withdraw money from your account. If you do you will have to pay not only taxes but a 10% early withdrawal penalty as well.

If you take a lump sum withdrawal from your 401k it is important to understand that 20% of the cash in your account will stay in there to help pay for taxes and other fees, but it will still be counted as income. Also there still is a 10% penalty to deal with.

If you are withdrawing money early you might also be able to do something called an installment plan. In this case the money will be distributed to you through small monthly payment for 5, 10, or 15 years. You will still have to pay both the 10% early withdrawal penalty and taxes, but it could be extra income if you absolutely need it.

Talk to the company that hosts your 401k to see if this is one of the 401k withdrawal options for your plan.

A third option is to do a 55 401k cash out. If you left your job when you were at least 55 years old you can take money out from your account without paying the 10% penalty. It is kind of like an early retirement bonus.

401k Hardship Withdraws

If you qualify for a hardship withdrawal you may be able to take money out of your account without actually having to pay the 10% penalty on it. Talk to a financial advisor or your account custodian if you think you qualify. Some examples of this include.

• Death, in which case your Beneficiaries can take the money out early
• Permanently Disabled
• To pay Medical expenses that were over 7.5% of your Adjusted Gross Income
• Higher education

Creative Ways to get money out

There are also a few creative 401k withdrawal options that can help you get money out of your plan and penalty free, but there is a catch. These two options are.

1. Take a loan

You can always take out a 401k loan. If you do you must pay it back with interest, but it is probably better then taking out a withdraw, especially if you are able to pay it back fast.

2. Rollover your plan

If you decide to do a 401k to IRA rollover you will be given a check for 80% of your account balance and have 60 days to deposit it into your IRA. You have 60 days to do whatever you want with that money.

Of course the downside is that you have to pay it back and on top of that you have to come up with the additional 20% of your account to deposit into the IRA. So it is kind of like borrowing money from a loan shark with a high interest rate.

Over 59 ½

If you are over the age of 59 ½ the 401k withdrawal guidelines allow you to take money out without paying the 401k early withdrawal penalty.

If you are over the age of 70 ½ then you will have to start taking out mandatory 401k withdrawals based on your account balance and how long they predict you will live. You can always take out more than these mandatory 401k withdrawals, but never less.

401k Withdrawal Options Review

There are a lot of withdrawal options available. Be sure to consider the pros and cons of taking money out of your plan before jumping in. In general leaving money in your account until you have reached retirement is considered a good idea, if you absolutely need the money today, than hopefully this page has helped understand your options.

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