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Asked 7/22/2008
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Can I close my 401k plan and have the money distributed to me while still employed by the company I started the with? I would like to close my 401k plan and have the money sent to me before age 59 1/2 and while I'm still employed by the company I started the plan with |
Answer 1/1 - Submitted 7/24/2008
That all depends on the particulars of the agreement you signed when you enrolled in the 401K plan with your company. Normally you "can" withdraw your money whenever you'd like (after all, it is your money) but depending on the circumstances, you could be subject to an early withdrawal penalty. You will also have to pay federal and state income taxes on the amount you withdraw. When you make an early withdrawal of a 401K plan, it also reduces the options you have for disbursement of the funds when you retire for real.
If this is a large sum of money, you could end up losing 30 - 40 percent of it in company early withdrawal penalties and government taxes, since the amount of the withdrawal will be added to your annual income for tax purposes at the end of the year. If you have an emergency requirement for money, see if the plan will allow you to "borrow" money from your account instead of withdrawing it.
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