Early Withdrawal

Archive for the ‘401k Withdrawals’ Category

Question: How do you make early withdrawals from a 401k? What are the penalties?

I’m unemployed and I think I may need to dip into my 401k for money. How do I go about withdrawing the money and what kind of penalties are there?

Answer: You contact your plan administrator (phone no. on your quarterly statement).

Any money you withdraw will be taxed as ordinary income at your rate (15%, 28%, etc., but adding the 401k money may push you into a higher tax bracket), plus a 10% penalty if you are under 59-1/2. The plan administrator will withhold 20% for taxes on any money you pull out.

There are no special exceptions for people who need the money because they’re unemployed. You can set up a plan to withdraw money in equal monthly installments for either 5 years or till your age 59-1/2, whichever is shorter Ask the plan administrator.

Good luck, because it’s tough these days.

Personal Finance: 401(k) : Accessing 401(k) Contributions in an Emergency

Question: 401K Early Withdrawal (no hardship)?

I may want to take an early 401K withdrawal. I am very much in debt and am not worried about any penalties. I just need the money and it would only be about $5000 (after penalties). I need to know if I do decide, should I be allowed to withdraw all the money even though I don’t qualify for the hardship requirements?
Thanks for the input. Any suggestions as to what the better options are at this point?

Answer: If you have to, draw out as little as possible from your 401K. You can also draw it out as a loan, which means you pay yourself back typically at 10% interst to yourself, with automatic withdrawl from your paycheck over a 5 year period. This minimizes penalty.

If at all possible, try to get a consolidation loan rather than draw from your 401K. Most of all realize that you need to figure out how to live within your means if you want your debt to not recurr. Start by making a detailed budget with some allowed for savings and then stick to it. Otherwise the habits that got you in debt are likely to land you back there again.

401K Hardship Withdrawals A Disturbing Trend

Question: 401K Early Withdrawal Penalty?

Okay, I need an answer from someone who KNOWS FOR SURE about this rule. I already withdrew my 401k when I left my employer this year. I am filing taxes, well my accountant is. The plan holder took out 20% for Fed tax. Some people say this may be enough to cover the penalty , or may not be enough. What does this may/may not stuff mean? Dont they take out 20%, then tax you another 10% of the original principal amount? Example: I have 10,000 in 401k , get 2,000 withheld from fed tax upfront, then get another 1,000 (10% of 10,000) in April for a total of 30% of the original amount? Or am I misunderstand this rule?

Answer: You will owe income tax at your highest marginal rate plus 10% of the withdrawal.

When Can I Make Withdrawals From My 401k?