Liquidating 401k

Posted by / 16-Feb-2019 20:44

Even if the IRS allows a hardship distribution, your plan may not.

Plus, no matter why you need the money, you'll still pay taxes and a 10 percent early withdrawal penalty.

While I always recommend using early withdrawal from a 401(k) or IRA only as a last resort, if you find yourself in a financial crunch, it is possible to make early withdrawals (early being defined by the IRS as before age 59½) in certain circumstances. If your 401(k) or IRA is traditional, your contributions are pre-tax.

Depending on the type of benefit distribution provided under your 401(k) plan, the plan may also require the consent of your spouse before making a distribution.

Your plan may provide that rollovers from other plans are not included in determining whether your account balance exceeds the ,000 amount.

Any distributions of contributions or earnings at any time are subject to ordinary income taxes.

Plus, there's most likely a 10 percent penalty if you're under age 59½.

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Additional information to help you determine your required beginning date is included in Publication 575. The distribution required to be made by April 1 is treated as a distribution for the starting year.

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