Can I rollover my 401k while still employed?
In recent conversations, the question has come up as to whether you call rollover your 401k to a traditional IRA while still employed at the sponsoring employer. There seems to be some confusion about this and rumors of new laws that allow it.
The short answer to the question is, no. By law, you can not withdraw 401k contributions, that is, pre-tax salary deferrals, before severance, plan termination, turning 59 1/2, death, disability or hardship (and you can’t roll over hardship withdrawals).
The long answer is, yes, under certain circumstances, you can.
The standard exceptions do apply, for example, if you are 60 years of age or older, and still working, most qualified plans allow “age 59 1/2 rollovers”. If a particular plan does not, they most likely allow rollovers at age 65. The exceptions can add to the confusion and there is such a thing as the “in-service withdrawal”.
To me, the most interesting exception being the fact that the law only applies to your pre-tax salary deferrals. You CAN rollover (or otherwise withdraw) employer contributions, or employee (after-tax or rollover) contributions. And you can do so without any required taxes or penalties.
This can be a big deal. I know someone who’s matching contributions from his company were paid in company preferred stock and it ended up comprising a whopping 75% of his total plan holdings. He was not allowed, then, to diversify any matching funds elsewhere within the plan.
Being able to rollover the employer contributions was a great opportunity for him diversify his porfolio, get back to a better asset allocation, and contribute to more cost effective funds. But, it was not without penalty. The penalty (defined specifically by his company’s plan) was that he could not contribute to his plan for 12 months beginning from the day the withdrawal took place.
Some employer retirement plans have provisions for you to do a 401k rollover on some of the assets while you are still employed by the employer, but you’ll need to check with your employer to see if they allow it, and what penalties may be associated with it. Most 401k prospectuses and companies in general don’t make this common knowledge to employees.
This is always a confusing topic. Thanks for the helpful post. It’s something everyone should look into, particularly if they are in a less-than-great plan.
Thanks,
pf101
[...] Money tackles the question: Can I rollover my 401k while still employed (with the plan [...]
The secret to finding out if your 401(k) lets you do a partial rollover while you are still employed is to ask the right question. Ask if your plan allows “in service distributions”. If it does, then you can at least do a partial rollover/transfer. However, most 401(k)’s do NOT allow them.
Art Dinkin, CFP
If the plan allows for an “in-service” ira rollover, and the employee/participant is under 59 1/2, is there any “tax liability”?
Howard,
If you are rolling over qualified contributions, (employer contributions, or employee after-tax or rollover contributions), there is no tax liability. Again, the only possible penalties would be those specifically defined by the 401k plan.
[...] I thought I’d seen somewhere that you can roll over a portion of your 401k without leaving your employer (under certain circumstances) – here’s a summary… Can I rollover my 401k while still employed? [...]
This article is incorrect as I have completed many still employeed 401K rollovers for my clients. It is not a taxable event because you moving the money from one tax deffered (401K) account to another tax deffered account (Traditional IRA). In addition every subsequent year you can move more money out of your 401K. What are the benefits? I’m glad you asked!
1) You have access to many thousands more mutual funds. Whereas your selections are limited in your current 401K.
2) Better diversification. Your 401K may have 20 funds but I, as a professional can give you access to over 8000.
3) Professional Advice, whereas in 401K people generally choose funds in the dark. I can give you access to solid fund research.
4) I can also put you in a NY Life Product that guanrantees your rollover amount. So this become the minimum amount you will ever receive should the market crash or take a dramatic drop. If you rollover 100K that is the minimum you will ever get back.
But in a nutshell you can Rollover money from your 401K tax, into a T. IRA tax and penalty free no matter how old you are! I do it at least once a month for someone!
I’m still confused. My situation is that I’m 30, have considerable credit card debt, and a 401K with my current employer that would cover about half of my debt if I could access it (taking into account early withdrawl fees and taxes). So, can I rollover? Perhaps into a Traditional IRA, then into a ROTH?
Gret,
There is no IRS law that prevents you from rolling over money from your 401k while you are employed. However, many 401k plans don’t allow it, so you’d need to check with your 401k plan administrator to know for sure. Be aware though, that withdrawing the money to pay debt and rolling it over into an IRA are two very different events.
Thanks Clint. From what I understood, I wouldn’t be able to simply cash out of my 401K to pay off debt, and that I would need to roll into a T. IRA, then a ROTH.
I have a feeling they won’t let me take it out, and it just seems shady. It’s unfortunate because ultimately I would save more for my retirement if I weren’t paying interest on debt.
If they don’t allow a rollover, could I go to the owner of my company and ask him to change the rule, or would he be locked in to an aggreement with the 401K plan admin.?
I have recently graduated from college.
I find this “Inservice Withdrawal’ feature very attractive now that I am on the job hunt. Is there a list out there of (GOOD) companies that offer this feature to help narrow my job hunt search.
AWSOME INFO GUYS!!!!!!!
Hi , If Lamont is still on this board… hey do me a favor and drop me an email because I have a 401(k) at my wife’s current company that [the administering company] will not rollover in any way whatsoever, and when I complained about it …
[The administering company] contacted my wife’s employer and tried to get my Wife in trouble with the company. As if they have a legal right to threaten not only the vested assets of the plan but also my wife’s future employment with the company.
Drop me a line Lamont because I tried quoting them the Pension Protection Act of 2006 Section 824… I tried doing it as a partial … I tried everything and they basically tried to tell me that whatever the PLAN rules say… as if it’s up to the Plan administrator to determine for PEOPLE who were vested before the company was ever bought out to determine how someone’s assets are invested for the next 20 years.
They really ticked me off and basically thumbed their noses at me when I tried to tell them that they had to release the funds. And THEN on top of that , they tried to threaten my wife’s employment with the company.
I’m at buddhak0n@verizon.net .. Oh and by the way I’m the only Law School graduate in the conversation . Imagine that . Sorry but this industry is screwed people . Spitzer for all his faults had them dead right.
Hi Brian,
Although there is no law on the books that prevents you from rolling over a portion of your 401K while your still employed the “Plan Rules” seem to become similar to such a law. In my experiences I have come across many plans that limit such a transaction in fear that the employee may damage their future retirement income and I have come across an equal amount of companies that allow such a transaction. So, long story short, if the Plan Rules say you can’t do it, then well, you can’t do it! If you have the power to change the rules then you’re a powerful person.
It is a coincidence that your email address is hosted by “Verizon” because they are one such company that allows such a transaction for their employees. Their 401K is managed by Fidelity.
I would be interested in seeing if you could get the rules of the plan changed via an employee petition. I would use the points I listed above as reason why the company should make the change. Of course the managing company (Fidelity, etc) won’t be too happen about the change because people can move their money freely but it will benefit the employees if they are smart investors.
Good Luck!
Hi Dave,
There is no such list. The best way to find out is to ask the plan administrator or the plan manager. Also, just because the company allows this feature doesn’t mean they are a good company.
Hey all,
I’m in what might be an unusual situation. I have a 401K with the company that I work for. I worked for them for 7 years in the US, then in December 2007 I transferred to work for a subsidiary in Europe. I am now employed by the European company. I can no longer pay into my US based 401K, no longer get paid by the US company, no longer have US benefits etc. Instead I’m employed under a European contract that provides a local pension similar to 401K, local benefits, etc.
I want to get my old US based 401K into Euro based stocks. Since I’m no longer employed by the company in the US I thought there should be no issue getting the funds rolled over to an IRA that would give me more investment options. However the administering company is saying that since I still work for the same parent company that I can’t roll the money over out of their plan.
Do you think this is correct, and if so is this an IRS rule, or is this a rule that the administering company is setting? Can I challenge it in any way?
Thanks for your help!
Kieran.
I need a book on the subject of in-service-withdrawals from a credible source.
Any suggestions?
I have pretax funds in my 401k that is totally contributed by me. My plan says that I can’t rollover my fund to any other plan. I’m trying to research how I can make this happen. If I have more investment options in an Traditional IRA why keep contributing to the 401k plan.
I am currently a pension administrator and process many distributions that are rollovers. In order for any distribution to be “rolled over” it must meet the criteria as given in the article listed above.
“By law, you can not withdraw 401k contributions, that is, pre-tax salary deferrals, before severance, plan termination, turning 59 1/2, death, disability or hardship (and you can’t roll over hardship withdrawals).
“The standard exceptions do apply, for example, if you are 60 years of age or older, and still working, most qualified plans allow “age 59 1/2 rollovers”. If a particular plan does not, they most likely allow rollovers at age 65. The exceptions can add to the confusion and there is such a thing as the “in-service withdrawal”.
Rollover distributions must also be rolled over to another qualified plan or to an IRA. After working about a year in the retirement plan industry I have not seen any exceptions to these rules.
To answer Gerald’s question as to why you would contribute to a 401k when you have more options in an IRA: The match that you receive from your employer, and the higher contribution limits for tax-deferred contributions. Generally speaking your employer will match, up to a certain percentage, whatever amount you contribute. This is free money being offered by your company as an incentive for you to save for retirement. Once you have taken full advantage of the match, there is no other reason to contribute beyond that percentage – you would be better off contributing the excess amount to an IRA, or even just a taxable brokerage account – if you’re not in a high tax bracket, the tax deferred compounding on your investment certainly helps but doesn’t have such a dramatic impact as if you were in a higher tax bracket . The IRA contribution limit for an individual in 2008 is $5000 vs $15,500 for 401ks (this is assuming you’re under 50 years of age. Over age 50 the IRA limit is $6000 and 401k limit is $20,500. An additional benefit of a 401k vs. an IRA is the ability to borrow from your 401k in the form of a loan (as opposed to withdrawing the funds from your 401k which is a taxable event and in addition the IRS will slap you with a 10% penalty if you’re under the age of 59 1/2) which is not available in an IRA.
There are a number of larger corporations that offer “in service withdrawals” and the ability to do so is based on the 401k plan documents which you can obtain from the Third Party Administrator (TPA).
wow, this is great dialog, thanks everyone for the fantastic comments. In one article I learned more than about 4 days of random browsing of “articles”
To everyone I recently found this article and wanted to add my $0.02:
First and foremost the plan must have the “In-service” withdrawal provision in the plan document in order to rollover 401k dollars into an IRA (expect to get a lot of resistance from the broker or Third Party Administrator (TPA) if this is not already in the plan because less plan assets equals less money to be made by both). Provisions for an age and length of service at a company must be made as well. So for instance say you must be age 40 and have at least 5 years of service (this helps with companies that have vesting schedules and you will see why this is important below).
Secondly there are three types of money that can be rolled from a current 401k into your own IRA they are:
1.) Money rolled over from a previous 401k (either through a plan change or from a previous employer)
2.) Matching/Profit Sharing contributions from the Employer
3.) Money Growth inside the 401k Plan
Ironically the only money that “cannot” be moved prior to age 59-1/2 is the money that you as the employee voluntarily contributed.
So say we have Bob Jones who has contributed $10,000 per year for the last 10 years and his company matches his full $10,000 each year and his account has grown to $250,000
His money is classified as follows:
Voluntary contributions: $100,000
Employer Match: $100,000
Growth: $50,000
If his company had an “In-Service” provision he can move both the match and growth into his own IRA ($150,000 total) prior to age 59-1/2. He cannot however move the $100,000 he voluntarily contributed.
Hope that helps,
Josh Smith
First off,
Lamont is giving incorrect information. Section 401(k)(2)(B) and Section 403(b)(11) define when employees may take distritubtions… Last time I checked the IRC is a form of law…
Chris said it best by saying
“By law, you can not withdraw 401k contributions, that is, pre-tax salary deferrals, before severance, plan termination, turning 59 1/2, death, disability or hardship (and you can’t roll over hardship withdrawals).”
Plan rules can are capalbe of being even more strict while someone is still employed.
Josh mentioned
“Secondly there are three types of money that can be rolled from a current 401k into your own IRA they are:
1.) Money rolled over from a previous 401k (either through a plan change or from a previous employer)
2.) Matching/Profit Sharing contributions from the Employer
3.) Money Growth inside the 401k Plan”
I cant find legal guidance on this yet but have been checking. I have been reading up on Section 414(w) and the proposed reg for this, but I am not sure if it applies.
Bottom line, there is much confusion about this stuff, when maybe there shouldnt be.
can i rollover my existing my 401k if my company is no longer contributing / matching my %
My father retired in 1995 ,…wondering how can i find out how much is this worth ? his 401 k ?
He passed away in 2003 and we totally forgot that he has this?
and how do I trace it down.
My 401k account lost $100k last year – 1/3 of my balance! On top of that, my company just suspended matching funds. I’d like to get out of this plan but am being told by the plan administrators that the only way I can do that is to end my employment. I don’t want to withdraw money, just roll it over to an IRA or something. This is ridiculous, other than leaving a company I have been employed with for 20 years, what can I do? I can’t just sit here and watch all my savings evaporate!! The plan administrator says it’s an IRS rule but I’m not so sure after reading some of these posts…
Lynn,
If your goal is to move your money into an investment that will not lose money, you can almost certainly accomplish that without pulling your money out of the 401(k) plan. Your plan probably offers a money market or guaranteed fund of some sort. Likewise, you if you invested in an IRA, you could very easily lose as much or more as you’ve lost in the 401(k). It’s not about 401(k) vs. IRA. It’s all about what how you choose to invest within either of those arrangements.
Whether you should move your money to one of these more stable accounts is a different question. I don’t know you so won’t give you advice.
I’m a fee-based 401(k) consultant that works with a dozens of plans around the U.S. and has a low tolerance for hucksters. My warning — as one with nothing to sell — is this: Beware those who are encouraging in-service rollovers out of 401(k) into IRA’s. Bad guys are preying on frustrated investors right now and they do not care about you. They will probably also tell you that they had all their clients bet on the Giants in the 2008 Super Bowl. Stay in your 401(k) plan and see what advice services are available to help you make no-nonsense investment decisions from this point forward.
My company is probably going to stop the matching on our 401K. Does this qualify as a plan changing event? I had a 5 % match. This helped when the prices dropped. I only lost matched funds. I have a little over 7k in the fund. Would you suggest i keep contributing my own funds, or stop now and invest in the market on my own. I do not think I can withdraw my funds without a penalty, so I most likely have to leave what I have in there alone. Any suggestions would be welcome
Our company has been working with many right now on “in service distribution”. This is a time when you need to look at security. We roll alot of employer contributions into indexed annuities. I know everybody has there opinions on growth and everything, but I am telling you one thing, at least last year none of our clients lost any of there initial investment. Yes there where very minimmal gains, but no loses.
If you would like help on seeing if your company allows for “in service distributions”, just let me know and I would be glad to discuss it with you. Imagine being in a product where your prinicpal is safe, and you only take part in the market gains, not the market losses.
My employer is no longer going to contribute to my 401k can I roll it over to a differant broker?
I want to rollover my 403b to IRA and then next year to when income limits of off, transfer it to Roth. Question is on employment termination. If employment ends, is there a time limit on when I could be rehired by the same employer, in terms of making the termination a legitimate event that allows for 403 b rollover?
I want to roll over a portion (mostly company contributed) of my 401k into a Trad IRA on the street and I have a lot of balls in motion here: the company is switching their plan at the end of the year as a result to a class action suit ( under the new plan, all investments will be purely ‘institutional’, I lose company common stock – absorbed into a 98% stock+2% cash “stock fund”, as well as an openly traded index fund that I have made a lot of money with this past year that is being converted into a non-public institutional version of a similar index fund.
During that time, while the aforementioned 401k change is taking place, I will be ‘unemployed’ due to a temporary lack of work – I will be expected to file unemployment to qualify for assistance from my employer, so, if the state says I am unemployed, I am unemployed in a legal aspect, right?
I can figure the company match fairly easily, and I know what I have put in, so the remainder would be earnings, right? Are “company match” and “earnings” air-tight transferable? Why not the whole thing during the period of time I could argue that I am unemployed – no contributions being made/matched in my 401k?
“To me, the most interesting exception being the fact that the law only applies to your pre-tax salary deferrals. You CAN rollover (or otherwise withdraw) employer contributions, or employee (after-tax or rollover) contributions. And you can do so without any required taxes or penalties.”
Can you cite your source in the IRS code for this statement? If true, this would be a great boon in my particular case.
I left my job a year ago and didn’t receive my roll over paperwork until October of 2009. In the mean time, I was separated from the new job for lack of work and I returned to my previous employer after an eight month separation. I would like to roll over my 401k to an annuity, but the plan sponsor says that because I’m working for the original company again they won’t do it. Can they do this?
“Being able to rollover the employer contributions was a great opportunity for him diversify his porfolio”
So true! Most 401K’s offer less choice today than 10 years ago. I reviewed a friends 401K the other day. There were not many funds worth owning.
I am 34 yo and want to withdraw the money I placed in a 403(b) with my current company. I have no reason for doing so except to withdraw the money “I invested” over the past five years to move closer to becoming debt free (for a strategy know to me).
The company says that the IRS will not allow this….blah blah blah. It is actually the company or the plan administrator that will not allow this.
For all of you folks convinced this (early withdrawl) is a bad idea, let me show you about time value of money (there is more that you didn’t learn in finance class):
Say I lose 25%, because I am in the 25% tax bracket. Now I have 75% left. Well, I would also pay that money if I had earned it anyway. So, to me, that value is not lost. It was actually never there! It is the cost of earning money in the U.S. Financial advisors love this to use this to their advantage.
Next I would lose 10%. Okay, consider that a penalty the IRS mandates. I’m okay with that too. There is a cost of doing business and Uncle Sam set this up. We all know by now early withdrawls, with no “okayed reason” will face the 10% early withdrawl period. Got it!
Now I am down to 65% left. Some states require money for their coffers beyond this. For this example, we will say that the state requires 5%. So now I am down to 60%. Oh no!! Most of you advisors fear this…….well fear not! Because I would still be at 70% if I actually was being paid that through my current earnings anyway!! Tax law 101: All income is taxable unless otherwise stated by law.
So next the company says, no Mr. ____ you can’t have it, it’s not legal. Bull *&%^! What the company is failing to say is that “this company/this plan adminsitrator does not allow it until retirement, death or any of the previous mentioned reasons. We are smarter than you and this is how we make money. We tie up your money for 20-40 years and as long as you are employeed hear, your stuck buddy!…..we will use the IRS rules as a guise, but we seek to make money by controlling you/your money! See as you plan administrator, we pay….I mean have a great relationship with your company. They agree with us that you can not have your money and we will just say the IRS doesn’t allow this. But the IRS actually does. The only way you can have your money now (pre-retirement) or under any other defined distribution, is for you to quit us. Then and only then can we not hold your money hostage……as defined by our own predtermined rules and greed (that we never disclose in the beginning.)”
“A bird in hand is worth more than two in the bush.”
About time value of money, you finance majors understand this! For simplicity purposes, if someone has determined their 60% is worth more today then the 70% will be down the road, based on their own situation and calculations, yes, it may be wiser to take the money NOW so that they can invest more in the future. For me, I wanted to take my money now. That would allow me to pay off a car note NOW, become debt free over the next 16 months and return to investing more, lets say 15-35% of my income, after I am done. But, my plan administrator says that I can not unless my employment is terminated.
Therefore, I am considering just that. Oh, more info: you business majors will understand this.
Say you are going to invest in a foreign country. Since we have historically lived in a great country, no one has ever considered that you must consider how stable the country must be before making a wise investment decision. Well, with current days and situation, that is exactly what I am questioning at this time. I want my money so I am can pay off ALL of my bills, erase my retirement – or risk loosing this money in a situation where we have radicals changing the rules day by day to fit their political agenda. That is, I work in healthcare. I think this industry & country is facing drastic cuts to it’s working force in the days ahead under the radical progressives in leadership. (Progressives only understand power and control.) They have already laid the groundwork to pretty much mold this industry over the next 5-8 years. Therefore, for me and my house, my situation is stable today, but no one can say that I will be in the same position or better in 5, 10, 15, or 20 years from now. Therefore, that is why I am positioning my household to live off the land, if needed, starting before the healthcare industry is changed forever beginning in 2014.
Why I am willing to give up the 10% extra today? Some of you intellectual advisors are trained to tell people “no, it’s a bad idea.” But, I say to you, you don’t have much street smarts.
That is, when the current President’s people are saying that “Chavez….in Venezula……we saw an incredible revolution…..” you better look out! No matter your political agenda, I would consider that “fine print” if I were considering a contract with these people. Better, you better prepare for the worst and hope for the best. That is what I am doing. If I am wrong, well then the next 20-30 years of me investing is simple CD’s at a rate of 15-35% will be enough to make up the difference for retirement.
Some bozo’s will think I am paranoid, but you must ask your own self “are their any red flags in todays market?” My answer to that is “yes, probably more red flags than not.” Next, you must ask “if I was 34 yo and not retiring until I am 65ish, can I trust that my money will be there……………?” Uh, ……do I need to answer that? wind back the clock, study history. 10 years ago I would have said GE would be around for forever. Look at the market cap today compared to then……….(I hear crickets chirping). No matter your political motivations……….look across each industry and think about companies you have considered stable in your lifetime………..GM, Dell, Microsoft, Steel companies, oil companies, Chrysler, airlines, healthcare, etc. I bet the workers in GM in the 60′s would have been singing about their their future…..sure, they got to retire. What about their workers in the 80′s….the 80′s looked bright……a lot of those workers were probably thinking different in 2007, if they were closing in on retirement.
In strategy class, a few years back (2006), one of my friends turned in a paper on GM and about how it should go forward….a suggestion of it’s strategy. That paper, he failed….why? Well, he advised that the company would enter into bankruptcy, no matter what. The proof was in the numbers. The instructor wrote to him on his paper “GM will never fail….IT IS AMERICA.” Good thing, that student didn’t learn everything that the instructor taught. I hate that GM failed, but that attitude is resonated across this land. Capitalism, to me, is paper……..just like your 403, 401, 457, or 4whatever. Kind of like the statements that were sent out in those Ponzi schemes. One day it will fail….but hopefully the bottom of the pyramid will keep growing.
Many people at my job said they were getting money out of their 401k and so I decided being in the bind I am in I pretty much live off of my credit cards and keep digging further and further into credit card debt I buy gas and groceries on them to get by I asked my employer if I could take some money to pay them off then that will free up about 600.00 a month to buy gas and groc. with he told me it wasn’t financial hardship enough. Very upset about this I read through our employee 401k handout and I did not see anywhere in there were it said I could not roll it over I though maybe I could roll it over to a traditional Ira and then in a little while I would draw it out of course paying the penalties. Asking my employer if I could roll it over he told me know that it was against regulations. This is very upsetting and is it true someone please help! Also I feel like if I keep pushing the issue he will try to find a reason to let me go. I need cold hard facts. Thanks for any advise.
I still have seen no answer to the question…… If my employer stops contributing to my 401K can I now roll it over to an IRA without penalty?
My employer stopped contributing to my 401K almost 2 years ago. I have been given the same answer that everyone else has been given….. not allowed by the IRS….period.
They claim they added options to lower the risk.
But I am looking to invest it in CEF’s that pay monthly dividens from within an IRA. So my money is still in a tax defered IRA and making dividens that are in government municiple CEF’s that are tax free.
Now there are other CEF’s that I am invested in that draw a higher than usual dividens but they are not tax free. But they are good high paying investments through Nuveen, Alpine, Dreyfus, and Cornerstone. My 25K from my 401K will draw about 400 a month from CFP.
So is my employer stopping contributions a qualifying event?
Tell me this…I am OLDER than 59 1/2 and my company says NO to in service rollovers and also says I have to be 62 or older or terminate employment to get ANYTHING. Are these ALL rules that the “plan” can set? Are there no rules set by the Govt??? This company is not above lying to their employees. If there is any “law” that mandates the age at 59 1/2 tell me where to find it. Can “the plan” set the age for accessing ones 401 K any where they want ???? Thank you.
I have a current 401K, it is held by Hewitt Associates i am currently employed by KOCH induistries and they said that i can take a loan but i can’t roll out a large chunk in to a self directed IRA. I am surprised that they can do that!!!! That is my investment and i have to pay a maintanence fee on that account. I only want to remove half of the account ballance and purchase Real Estate with the funds and hold the property in a LLC IRA, is there any hope that i can change there mind on this or force them to allow me to take this action?????? Thanks Mike……
If you belong to a company 401k plan and then become an “Excluded Employee” from the plan. What happens to your account?
I became an Excluded Employee (because I went to work with a foreign affiliate of my company) and was given an 30-day mandatory option to rollover my 401k funds. I rolled in over into an IRA (under my control, much happier and doing so much better!).
. . . and a year land four months ater I returned to the states, rehired with the U.S. Affiliate and now the plan administrator says they made a mistake and want all the money back, plus earnings. Do I have to? I don’t want to.
Even though a Direct Rollover was done, I am willing to pay the taxes and penalties if I am allowed to keep the money. fully vested money. 15 years on the job.
Most of the questions here can be answered at the US Dept of Labor Do NOT make the mistake of not being informed and trying to undue a bad decision. You have rights and as long as you approach these problems with verified answers, you should be OK! With all of the turmoil in the economy and fluctuations of the market, it is very hard for some workers to see the 401K’s lose value and not be concerned. The best thing to do is check with your employer, see if you can do better with your own individual plan, but if you get a denial, tell them you want an inservice withdrawal. Just make sure you rollover to an IRA and fund it with your choice of financial products. Otherwise you will have a diminished retirement. If you just want the cash out, be prepared for the penalties for early withdrawal, IRS form filing, and yes additional taxes.
Only as a very very last resort should you cash out for day to day expenses.
I left one employer and put the check from the 401K to Traditional IRA CD and I would like to add money, but I was told by someone that if I contribute to my current employers 401K I cannot contribute to the IRA CD that I opened. The reason I did not roll it into the my current 401K is because at the time I received the check I had not been with my current employer for one year. I was told I could not roll it into my current 401K
I want to close out or get distribution of my 401k safe harbor plan at age 64, still employed but on medical leave of absence. Is this an option for withdrawal of all funds?
We should change the law then to let people decide what to do with their own money. Sure, charge the appropriate penalty, but as adults, we should be allowed to make our own choices even if the “experts” don’t agree! Last time I checked I thought we were in a free country, even if that leads to a mistake. How patronizing and arrogant these 401k admins are to think they know better than we do as to what we do with our own money. What it is is just a scheme to force people into investing and not allowing them to change their mind so that the fat cats on Wall St can keep sucking us dry like leeches! I know we have a choice of joining or not and stopping our contributions, but when you have a pile of your own money sitting there and they say you are not allowed to have it, it pretty much stinks.
Here is another goofy part of the rules, you can take the money out to pay for college. Whoop-de-do. Most people going to college are not employed and thus have no 401k to draw from, and those that do have one, are employed and thus out of college. Another catch-22, typical gov.t nonsense!
Anyway, let’s change the law to make it USER friendly!