Saturday, 19 August 2017
401K Withdrawal Rules PDF Print E-mail

When considering the withdrawal of 401K, to act cautiously. Each 401K withdrawal constitute a waiver of the important advantages of the previous 401K contribution plan. Each 401K contribution charged with tax incentives: not only contribute to taxation, as well as investment growth in your account is tax deferred.

401K Withdrawal Rules

401k withdrawal rules. With few exceptions, all the 401K withdrawal is taxed as ordinary income. An additional 10% early distribution tax penalty will be assessed if you have not reached at least age 59 ½ when you take your distribution. Some exceptions to this penalty include:


• You die, and the attention paid to the recipient
• You become disabled
• You stop working and at least 55 years
• You can withdraw an amount less than the allowable as a medical deduction of expenses
• You begin to substantially equal periodic payments
• Your care is associated with a qualified domestic relations order

Additional Considerations 401K Early Withdrawal

In addition to penalties and taxes owed to the early withdrawal of 401K, you lose all potential future growth of investment, the money the pension plan. In addition, because there are annual limits to the amount you can contribute to the 401K plan, you can not do for the previous conclusion late, even when you are on more solid financial ground.


Although the 401K loans have their drawbacks, we consider the 401K loan if you are in a financial pinch, and the only option seems to be your retirement money. 401K loan should be preferable to direct the withdrawal of 401K.

Delaying 401K Withdrawal

You can delay receiving distributions from the 401K plan and thus take maximum advantage of your tax deferred growth until April 1 of the year following the year in which you reach 70 ½. (Exception: if you still work for a company, you do not own 5% or more.) Then you must withdraw at least with the required minimum distribution (RMD) each year.


Your RMD is calculated as the account balance at the beginning of the year in the division of your life as defined by the IRS in its uniform life table (if your only beneficiary of your spouse and your spouse more than 10 years younger than you).


Penalty for not leaving your RMD is 50% of the difference between what should have been distributed and what is actually withdrawn.