401k withdrawal question

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cppoly
Posts: 50
Joined: Sat Jan 26, 2013 8:21 am

401k withdrawal question

Post by cppoly » Mon Apr 16, 2018 9:16 am

I'm looking to possibly withdraw money from my 401k account but the only way to do so is with a "loan" that I pay myself back with through paycheck deductions.

Instead I would like to withdraw money not as a loan but as a simple withdrawal (with tax penalties I understand).

So my question is, shouldn't I have the right to do so and not be forced to take a loan out where I pay myself back?

dbr
Posts: 27207
Joined: Sun Mar 04, 2007 9:50 am

Re: 401k withdrawal question

Post by dbr » Mon Apr 16, 2018 9:44 am

As far as I know you can withdraw with a tax penalty at any time, but maybe there is something I don't understand.

When you say "looking to" did you go online at your 401k and try to make a withdrawal and you can't or they tell you they won't do it? Who is forcing you to take a loan?

cppoly
Posts: 50
Joined: Sat Jan 26, 2013 8:21 am

Re: 401k withdrawal question

Post by cppoly » Mon Apr 16, 2018 9:50 am

I called the company that manages the 401k and they said the only way to withdraw was through a loan so I just gave up on the idea.

So I want to push back on this.

k3vb0t
Posts: 58
Joined: Mon Jun 02, 2014 4:42 pm

Re: 401k withdrawal question

Post by k3vb0t » Mon Apr 16, 2018 9:56 am

IRS rules on early withdrawals, including hardship withdrawals, and loans: https://www.irs.gov/retirement-plans/ha ... -and-loans

It would be helpful to know why you're looking to do this as it is potentially a very expensive proposition. If you're under age 59 and 1/2 you not only have to pay the income tax but a 10% early withdrawal penalty. This can eat up 22%, 35%, or more of your withdrawal.

dbr
Posts: 27207
Joined: Sun Mar 04, 2007 9:50 am

Re: 401k withdrawal question

Post by dbr » Mon Apr 16, 2018 9:59 am

A little research on Google suggests that a Plan can deny you withdrawal of your money until you are retired, age 55, or otherwise no longer working for the company, etc. Some plans allow for hardship withdrawals. These are all Plan rules and not prevented by IRS rules. You can always continue to argue your desire with your company management.

cppoly
Posts: 50
Joined: Sat Jan 26, 2013 8:21 am

Re: 401k withdrawal question

Post by cppoly » Mon Apr 16, 2018 12:01 pm

Thanks

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Earl Lemongrab
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Joined: Tue Jun 10, 2014 1:14 am

Re: 401k withdrawal question

Post by Earl Lemongrab » Mon Apr 16, 2018 2:31 pm

Take out a loan, then don't repay it. It becomes a regular withdrawal after a time. That being said, don't do it.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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