401k withdrawal

[moogle]

What is the name of your state? Florida

I am desparate for money at this time. My 401k is my only hope. My employer says I can't have it unless I leave my job. An attorney told me I could get it but did not tell me how. Resist temptation? Why? My 401k is about 20,000 and my realestate is over 100,000 which I could lose if I can't get my 401. no comparison there. Can anyone help me?

 

[cbowland]

You just need to ask your employer for a "hardship withdrawal". You can withdrawal the entire amount of the vested portion of your 401K. Your plan will most likely prohibit you from contributing to your 401K for 1 year after the withdrawal.

Another option is to take a loan from your 401K. You can take a loan of half of your vested 401K portion. You can then pay this back at $50 a month or whatever you can afford. The payments will go back into your 401K.

Some employees find they need to go above their HR department directly to the company that administers their 401K.

Have a great day!

 

[ShyCat]

Not all 401(k) plans allow hardship withdrawals or loans. They are allowed by ERISA, but employers are not required to provide them. You will have to dig out that copy of the Summary Plan Description (SPD) that your employer gave you and read it. If you can't find it, ask HR for a copy. The SPD will explain if loans or hardship withdrawals are permitted.

Remember, if you are allowed to take a hardship withdrawal, you will have to pay ordinary income tax plus, unless you are over an age limit, a 10% early withdrawal penalty on the withdrawn amount. For example, if you withdraw $10,000 when your marginal tax rate is 27%, you will owe $2700 in federal income tax plus $1000 in penalties. Net, $6300. And that's not accounting for state income tax and (possible) penalty.

On the other hand, if you are able to take a loan, no taxes or penalties are assessed. However, you will re-pay that loan (plus interest) with after-tax dollars, not pre-tax. When you withdraw that money later in life at retirement, you will again pay ordinary income taxes on the withdrawn amount. So, there is at least a small element of double-taxation there.