401K withdrawl

[idgit152]

What is the name of your state (only U.S. law)? NYS
I have been contributing to a 401k plan for 2 yrs. I just got hired for a job where I will have a company pension and other benefits so I no longer want to continue a 401k. I realized that I will be taxed and then charged an "early withdrawl" fee if I take the money now.
My issue is, I am currently in default on federally funded student loans. I'm currently having my wages garnished 15% and my fed tax return is withheld from me. (no my state return though) Will this effect this 401K money in any way? Will the gov't expect 15% of this or all of it? I don't want to close out my 401K thinking I'm going to get this money and then the next thing you know instead of a check I get a letter from the gov't in the mail saying that money has been withheld and applied to my loan balance like I get regarding my tax return.

Any info on this would be greatly appreciated, thank you.

 

[CourtClerk]

You are obviously not that great in the financial planning area. How about you just leave the money where it is and collect it when the time comes?

 

[cbg]

Is the 401k through your current employer or a past employer? It makes a BIG difference.

 

[swalsh411]

The IRS is not in the loop when you take a withdraw until they get the 1099. It's not like with tax refunds where they will take it. You will pay the penalty and owe taxes on it however.

 

[idgit152]

CourtClerk: Yes, I've made some HUGE mistakes in my past that were bad financial decisions but I have moved on and am living w/ those mistakes as best as possible.

It's only 4 or 5 K, so it's silly to leave it sitting there another 25 years until I retire. Besides which, I am moving next month and would like to pay off my car, so the money will serve me better now.

CBG: The 401K plan is technically for my current employer, but this is my last week there. I start a new job next week. So next week they will be a past employer. (hope that helps clarify)

SWalsh411: Thank you....I was hoping that was the case.

Thanks all.

 

[ecmst12]

After your employment is terminated, you can withdraw. You will pay a large penalty both when you withdraw the money and again at tax time.

 

[cbg]

Yes, that's what I was getting at. As long as they are your current employer, under Federal law you cannot withdraw at all. (Subject to loan provisions or a hardship withdrawal - eligibility for hardship withdrawals is set by Federal law and can only be for limited reasons which are also set by law. And that's assuming that your plan allows for either loans or hardship withdrawals in the first place.)

After your current employer becomes your former employer, you will have the option of withdrawing it if you are willing to take huge penalties and pay the taxes. I can't say whether or not they will be subject to taking care of your defaulted loans - I can tell you that as long as you leave the money in your 401k or roll it over to another similar account such as another 401k or an IRA, they will be protected.