What is the consequences for taking out your 401k out early?
409573
It depends on WHAT you are taking the money out for, if you want to buy a home for the first time you are allowed to "borrow" up tp $10,000 without major penalties. There are also allowances for college tuition.  Check with your 401K account advisor, if you pay back the money within a certain period of time, you are not charged major taxes or penalties.
129902
As the other answerer mentioned, there are two\nsituations:\n\n  1) \n     You rolled the 401k over from a previous employer's\n     plan into either your new employer's plan or\n     into a private 401k account (ie. at Fidelity or\n     Ameriprise or something like that).\n\n     In that case, it is not considered a withdrawal\n     and there are no taxes involved.\n\n     As I recall, you have something like 60 days\n     from when you remove it from one plan before\n     it must be placed into another.  Keep your \n     records in case the IRS checks up on you :-)\n\n  2) \n     If you withdrew the money and just kept it in\n     a bank account, you not only have to pay taxes\n     on it, but you'll probably have to pay a \n     penalty as well.
453126
I'm not a financial advisor, so you should check on this, but I believe that you will pay early withdrawal penalties plus income taxes at your current base rate on whatever you take out for whatever reason before you are 59 1/2.\n\nYou can take a loan against it, but you'll  have to pay that back.  I think you can also divide the entire value by how many years you likely have left to live (from actuarial tables) and take annual "substantially equal payments" without penalty.  All in all, very, very bad idea to use 401(k) money before you are at least 59 1/2.  \n\nCheck the Motley Fool for sound advice on paying off your loans.
1016477
Okay, you want to take some $ out & roll over the rest, right?  You get 60 days to roll over your 401K into an IRA or other employer (if your new employer allows this).  So you could partially withdraw what you need for bill to yourself & roll over the rest.  Early withdraw penalties are pretty stiff 10% penalty on $ taken out PLUS it is reported as regular income, keep that in mind.\n\nIf the former employer doesn't allow partial withdraws, then you could take the lump sum payable to you.  They will immediately penalize the 10% PLUS withhold around an additional 20% (~ 30% total) for anticipated taxes.  The only good news for this option: you should get a refund (if all else stays the same) because too much was withheld, IF you put back ALL the $ you withdrew from the 401K within the 60 days into the new IRA or new employer-sponsored plan.  Downside to this: you'll need to have $ laying around to make up the difference that was originally withheld from the old employer to fund the new IRA.\n\nThe less painful way is to do a partial withdraw if the old employer will allow this.  You can also leave the old employer $ with them if they (old employer plan sponsor/administrator) allow this.\n\nHope this helps.
1058103
In most cases absolutely NOT. \n\nReason #1\nIt would be very expensive.  Money withdrawn from your 401K is instantly taxable at your highest tax rate.  For most people that's 28% federal plus your state income taxes.   If you are under 59 1/2, you'll pay another 10% penalty.    That's a lot higher than the interest rate on your mortgage.\n\nReason #2 - \nIf you are still with the same employer, you can't just withdraw the money.  You can borrow from some 401K plans, it depends on whether or not your employer allows it, but..... this is a really bad idea too, because in addition to interest, if you leave the employer you MUST pay it back immediately or you suffer the same tax and penalties as above.\n\nReason #3 -\nBecause your mortgage is at a low rate that should be lower than the rate of return on your investments within your 401K.  In other words, the money in your savings is likely to grow a lot faster than the interest you will pay on your mortgage, plus the mortgage interest is tax deductable so it reduces your current income taxes.\n\nReason #4 - \n\nTime is your best friend on investments because the return on it gets to grow exponentially every year.  In other words, if your $260K grew 10% this year and every year, you'd have $286K next year and $314K the year after and so on and so on.  Each year the dollar amount that gets added to your account grows.  (this rough example doesn't include more money you add to the account).   If you took $150K out (and you'd really have to drain nearly the entire account to cover the tax and penalty loss), you'd only have $110K this year left to grow.  So instead of making $26K this year, you'd only make $11K, and each year that deficit would grow larger.\n\nReason 5 - \nYour house is a leverage investment.  Really, since you have a mortgage, even though real estate typically rises in value less than stocks, the rate of return on the actual money invested, is really much bigger than you think.\n\nFor example, let's say you have $20K cash invested (down payment, improvements, and monthly payments) so far and you paid $170K for your house a year ago.  If real estate in your area rises an average of 5% a year, then your house is worth aproximately $178, 500 now.   So..while 5% doesn't sound like a big return, and it wouldn't be had you paid cash for the house, what you have actually realized is an $8,500 gain on the $20K you have already invested.   That's a real return of of 42.3%!  If you take into account what you've saved in income taxes, the return is even better.\n\nSo..anyway you look at it, paying off your mortgage with your 401K would cost you a ton of money.\n\nOh..and worst case scenario. You are suddenly unable to work the rest of your life and all you have is your house and your 401K, should you do it then?  Nope.  Better to withdraw the payment for the mortgage as you need it and leave the rest invested to continue to grow since over time it is likely to outpace your mortgage interest by a large amount AND you leave that money free to meet other needs that may crop up.\n\n:)
867682
Federal law prohibits anyone from using a 401(k) account as collateral for a loan, except for a loan from the plan itself. Most plans allow for a loan of up 50% of your vested balance. However, unless you are being paid while on leave of absence, you may not be allowed to take a loan from the plan, because repayment must be done through payroll withholding.  If this is the case for you, then a hardship withdrawal may be your only other option. Others have noted that a hardship withdrawal is taxable and subject to to additional 10% early withdrawal penalty if you are under 59 1/2.
132063
You can withdraw from your 401(k) without penalty at age 59 and a half. Some plans allow you to withdraw money for specific purposes, but require you to repay it within a specific time period. Check your plan for details.
972936
that is a very interesting question. i had to put some real thought into that one. but to be honest i would have to say yes that i would like to know. i invest 20% of my income to save for my old age. i have no children to leave any assets to. so if i knew i was going to die before the age of retirement i would know to quit putting money in the 401k plan at work. and it would give me time to sell my more valuable personal posessions rather than have them become the property of the government or some greedy relative that i have never liked. and also to do the things that i have always wanted to do like take a few weeks on a luxury cruise ship and go on a gambling spree in las vegas. and buy a dodge viper just to see how many sets of tires i can burn off in a week. and i am still fairly young, in my late 30s. so i have never made any burial arrangements for myself yet. but i could have a tragedy and die at any time, even if i knew i was going to pass away next week it would give me time to make some arrangements rather than put my parents through it.
1005691
Before you start borrowing your retirement savings, you should consider the pro's and con's.\n\nThe best places I've found sound financial advice are:\n\nwww.clarkhoward.com\nwww.bankrate.com\n\nClark Howard is a well-known consumer advocate who loves to help us all learn the wisest ways to handle our finances.\n\nI've listened to his radio show and watched some of his news reports on tv for many years now.  I know that he would probably tell you it's not a good idea to borrow from your 401(k) at all.\nHe might also tell you that you can make a withdrawal without a penalty, under certain circumstances.  First time homebuyership is one of the main reasons they let people withdraw money early without having to pay it back nor be penalized.\n\nYou should definitely talk with your 401(k) plan administrator regarding your specific situation.  Also, be sure to check the IRS website for an explanation of how the rules about this work.
314625
In short:  Taxes.\n\n\nIn long:\n--  Roth doesn't force you to take money out at 70.5.  (Traditional does).  You can only put money in to a traditional up to age 70.  (Roth has no age cap)\n-- Roth has a $110,000 income ceiling for single filers, $160,000 for joint filers.  Traditional has no ceiling.\n-- Contributions to a Roth IRA are not deductible.  Contributions to a traditional IRA are partially deductible, depneding on your situation.\n-- Earnings are tax deferred in a traditional IRA.  This means you pay taxes on earnings when you take the money out.  Earnings are tax FREE in a roth IRA (with two exceptions: account open less than 5 years, or withdrawing before your 59 if it's not to buy a home or support a disability.)\n-- Early withdrawal penalties on both types of IRAs are an additional 10% ordinary income tax on growth if you withdraw before you're 59.\n-- Both have $4000 annual contribution limits.  $4500 if you are over 50.  (This is now $5000 for over 50, for year 2006)\n\n-- General guidance is that you should start your Roth first, when you are employed and can afford the taxes.  No taxes on growth means that more of the growth goes back in to earn more.  The longer this money is growing the better.  If you can put in your limit and still have income left, start a traditional.\n-- There are several IRA calculators out there if you want to plug in your planned investment amounts and see how they'll grow over time.  Just google "roth vs traditional calculator"
65352
You can usually draw out up to 50% but you have to pay it back like a loan (monthly payments) to yourself with whatever interest rate your 401k has in place usually around 8-12%.\n whatever you draw out to keep before retirment age you will be hit with penalties.\n Get ahold of your 401k people for details on rates and withdrawl policies.
714890
Not a good idea at all, the penalty for borrowing against your retirement funds is pretty heavy, they will tax the crap out of you, best to try the Ameridream program or Fannie Mae Foundation. Best of Luck.
519213
Those questions vary employer to employer.  If you right away go to another job that offers a 401k, you can roll yours into it.  If it's a while between jobs, you'd have to roll into over into an independent IRA.  You can cash it out but you will have to pay taxes on it.  It will be reported as income on your next tax return which will bump you into a higher tax bracket and more taxes.  \n\nLosing what your employer has put in depends on whether or not you are 'vested'.  For most companies, it's a year or two before you are vested.  Once you are vested, any money they contribute is yours regardless of when you leave or how.  If you're not vested, you could lose just a percentage of what they've paid in or all of it. Again, depends on the company.  Any money that you have contributed is yours and yours alone.\n\nSorry I can't be more specific but it's really a question for whoever takes care of the 401k stuff at your place of employment.
626560
It a retirement plan. Instead of paying the government right away, you get to keep it for interest, you give it back later when you take your money out. E-mail me if you want to know more. I can elaborate if needed.
562118
Basically, You have to pay the tax plus a 10% penalty\nTopic 424 - 401(k) Plans\n\nA section 401(k) plan is a type of tax-qualified deferred compensation plan in which an employee can elect to have the employer contribute a portion of his or her cash wages to the plan on a pre–tax basis. These deferred wages (commonly referred to as elective deferrals) are not subject to income tax withholding at the time of deferral, and they are not reflected on your Form 1040 (PDF) since they were not included in the taxable wages on your Form W-2 (PDF). However, they are included as wages subject to social security, Medicare, and federal unemployment taxes. \n\nThe amount that an employee may elect to defer to a 401(k) plan is limited. Therefore, your elective contributions may be limited based on the terms of your 401(k) plan. Refer to Publication 525, Taxable and Nontaxable Income, for more information about elective deferrals. Employers should refer to Publication 560, Retirement Plans for Small Business, for information about setting up and maintaining retirement plans for employees, including 401(k) plans. \n\nDistributions from a 401(k) plan may qualify for optional lump–sum distribution treatment or rollover treatment as long as they meet the respective requirements. For more information, refer to Topic 412, Lump–Sum Distributions, Topic 413, Rollovers from Retirement Plans, and Topic 555, 10–Year Tax Option for Lump–Sum Distributions.\n\nMany 401(k) plans allow employees to make a hardship withdrawal because of immediate and heavy financial needs. Generally, hardship distributions from a 401(k) plan are limited to the amount of the employee's elective deferrals only, and do not include any income earned on the deferred amounts. Hardship distributions are not treated as eligible rollover distributions. \n\nDistributions received before age 59 1/2 are subject to an early distribution penalty of 10% additional tax unless an exception applies. For more information about the treatment of retirement plan distributions, refer to Publication 575, Pension and Annuity Income.
151205
You can always rollover to your personal IRA account rather than taking the distribution.  Taking out the money from 401K not a good thing if you are not of retirement age because you have to give a lot to taxes and penalties.
1098393
If using hardship withdrawals for other non-house purposes is not allowed by your plan, your action is a violation of IRS regulations.  Here are the possibilities.\n\n1)  You could be asked to immediately repay the $8,000, or possibly just the $4,000.  If you are unable to repay, it can be deducted from your wages.\n\n2)  It could be reported to the IRS as additional untaxed income, causing your taxes to go sky high.\n\n3)  If you are in a position of authority, and you refuse to correct the problem, the plan could be "disqualified", causing taxes on all the plan money for the whole company to become due.  As an alternate, the company may be liable for an initial excise tax of 15% of 4,000, and 100% of 4,000 for every following year unless it's corrected.\n\nDon't mess with your retirement plan.  It's REALLY bad news.