The method and process of withdrawing money from your 401(k) will depend on your employer and the type of withdrawal you choose. Withdrawing money early from your 401(k) can carry serious financial penalties, so the decision should not be made lightly and should be a final resort option.
Not every employer allows 401(k) withdrawals, so the first thing you need to effect is check with your employer’s human resource department to see whether the option is available. whether it is, then you should check the fine print of your 401(k) method to determine the type of withdrawals that are allowed.
As of 2017, whether you are under the age of 59.5, a withdrawal from a 401(k) is subject to a 10% early withdrawal penalty. You will also be required to pay common income taxes on the withdrawn funds. For a $10,000 withdraw, once perfect taxes and penalties are paid you will only receive approximately $6,300. This should be considered before taking money from your retirement fund. You might also be eligible for a 401(k) loan. Instead of losing that portion of your investment account forever as you would with a withdrawal, a loan allows you to replace the money through payments deducted from your check. This option is not always available, so you will need to seek information from approximately the loan option.
There are some withdrawals that can be taken without a penalty. For example, withdrawing money for an economic hardship, to pay college tuition or to fund a down payment for a first domestic are perfect withdrawals that are not subject to early withdraw penalties, but you will gain to pay regular income taxes on the money. In some cases, whether you left your employer in or after the year in which you turned 55, you may not be subject to the 10% early withdrawal penalty.
Once you gain determined your eligibility and the type of withdrawal, you will need to fill out the essential paperwork and provide the requested documents for the withdraw. The paperwork and documents will vary depending on your employer and the reason for the withdrawal, but once perfect the paperwork has been submitted you will receive a check for the requested funds.