Pros and cons if you withdraw from 401k - The Bills.com Blog
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Pros and cons if you withdraw from 401k
Question: I will be 62 years old next year. I plan to start drawing my social security and work part-time. If I work part-time for the same company where I have worked for 22 years will I be able to withdraw funds from my 401K? Part-time workers are not eligible to contribute at this company.
Answer: The answer to your question will depend largely on your 401(k) plan?s policiesregarding distribution of funds. The IRS provides employers and 401(k) plan administrators a fair amount of discretion in when and how they distribute 401(k) investments to plan participants, so the rules can vary widely from one plan to the next. I encourage you to consult with your 401(k) plan administrator to determine if you will be able to withdraw funds from your 401(k) while you are still employed by the company which established the plan. From what I understand, 401(k) plans must begin distributing funds to a plan participant either when the employee turn 59 ?, or when the employee retires, whichever comes first. Distributions to employees like you, who are older than 59 ? but are still employed by the firm, are optional and are made at the discretion of the employer, so you must discuss your plan?s policies with your plan administrator. For employees that continue working well past the typical age of retirement, distributions must start when the employee turns 70 ? years old, even if the
employee is still working for the company sponsoring the plan.
In your case, since you are no longer a full time employee, and therefore not eligible to make further contributions to your plan, you may qualify for disbursements as a retiree. However, you need to discuss the situation with your plan administrator to find out your classification for payment purposes. You may also want to review the 401(k) account terms established by your plan administrator and employer to make sure that you are receiving all disbursements to which you are entitled under the plan. If you feel that your funds are being improperly withheld, you should discuss this with the plan administrator and with an attorney if you feel it necessary.
You should remember that even if you do not currently qualify for regular distributions based on your employment status or age, you may still be able to withdraw funds from your 401(k) if you qualify for a hardship distribution or other special distribution. The types of distributions
available to participants vary from plan to plan, so again, you will need to discuss this option with your plan administrator. Even if you withdraw funds from your 401(k) that would otherwise be taxed, you may be exempt from penalties and some taxes due to your age, allowing you to access the funds you need without fear of penalty. Before making any decision to withdraw funds from your 401(k), I encourage you to discuss your plans with a certified financial planner or accountant to make sure that your plans will not put your retirement investments at risk.
To read more about the regulations governing 401(k) retirement accounts, I encourage you to visit the Internal Revenue Service website at www.irs.gov .
I wish you the best of luck in obtaining the money you need, and hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com
Also, make sure to get a free financial health check-up with Bills IQ!
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