I am a college student, and have about $400 in my 401k account from a company I no longer work for. At this point, I am not concerned with retirement funds but could definitely use a little extra cash. Can I take this money out of my 401k? How do I go about doing that? Will they charge me? Even if they want half of the money or something, I would still withdraw it without thinking twice.
2007-01-30 08:28:32 · 11 answers · asked by sam h 1 in Business & Finance ➔ Personal Finance
Yes, you can take your money out. It'll be taxed at your regular tax rate and then an additional 10% penalty would be applied. That'll get you to right around 40-50% or so of your $400.
Personally I think it's a bad idea; better would be to roll your money over into an IRA and forget about it. Assuming you're about 20 and have 45 years before retirement AND you can get about 12% return yearly (not unrealistic in an aggressive account): That $400 will turn into $86,000 in 45 years! That's without even adding one cent to it (which I'm sure you'll do). So if you can wait that long it'll be worth $86,000. Take it now and you get $200.
I know it's hard for a college student to think that far in the future, but it's easy to sacrifice now, you're probably used to scrounging.
2007-01-30 08:39:54 · answer #1 · answered by Dean 3 · 2⤊ 0⤋
short term thinking....that 400 bucks will be 50,000 when you retire. But you're determined so you may as well be informed!
They will withhold 20% of it for taxes so you'll get $320. When you file your taxes you will be taxed on it according to your regular tax rate. Depending on your income that could be ZERO in which case you could get that $80 back. BUT...after your taxes are calculated you will need to add another $40 to that figure (10% early withdrawal tax and yes this applies to you even if you have college expenses. It's not a hardship withdrawal). Numbers are small enough that it normally wouldn't be a big deal...but if you're willing to sacrifice $50k of retirement for a bucks now you must be hurting enough that the taxes may be an issue.
The place where your 401k is held may or may not charge you a fee. If they do, it should be no more than $100.00.
good luck
2007-01-30 12:14:12 · answer #2 · answered by digdowndeepnseattle 6 · 0⤊ 0⤋
When the money was deposited, no taxes were withheld against those earnings. When you withdraw the money, they will withhold the taxes and assess a penalty. I want to say it's about 30-30% overall.
If it's a hardship situation or you're using the money to pay tuition or something, you may be able to withdraw without penalty.
You may not be vested in the entire $400. Did you contribute all of that money, or is some of it the company's match? Were you with the company long enough to keep matched funds based on their vesting schedule?
You should call the plan administrator. They will tell you how to do it, and what penalties and taxes will be withheld. They can also tell you if there are exceptions that apply in your situation.
This withdrawal will also complicate your taxes a bit---no more 1040EZ for you!
2007-01-30 08:36:11 · answer #3 · answered by Karen M 3 · 1⤊ 0⤋
Since you are no longer working for this company you should have been sent a form asking what you wanted to do with the money. Most company's will offer to keep it in the present account, roll it over to a CD or ask if you want to cash it out. They will most likely charge you a fee and the Federal government will penalize you for taking it out early. Contact you 401 k administrator for more information on your particular account
2007-01-30 08:38:10 · answer #4 · answered by curiousnktown 4 · 0⤊ 0⤋
You should be able to roll this out tax free into an IRA. At that point, since you are a college student, you should be able to withdraw the money. SInce you have college expenses, you should be able to take it out without the 10% penalty up to the total of your education related expense, although you will still have to pay the taxes at your normal rate.
2007-01-30 10:44:29 · answer #5 · answered by John R 1 · 0⤊ 0⤋
Yes, you can withdraw the money from the account - but there will be a penalty. Call the company who manages your 401K and they should be able to instruct you on how to withdraw it.
2007-01-30 08:34:10 · answer #6 · answered by Jeff S 2 · 0⤊ 0⤋
I had one that had like $800 in it and closed it you may have to pay taxes that all I really know of but Im not sure if thats how it is everywhere I have it w/merrill lynch and I didnt have to pay much sooo... just call the company who had you 401k or your old work place and they will be able to help you Good luck!
2007-01-30 08:34:03 · answer #7 · answered by CaSeY LyNe 3 · 0⤊ 0⤋
Because withdrawls are not normally allowed until retirement you have to fill out special forms.
The $$ dispensed will be taxable the year withdrawn plus the government will penalize you and extra 10%.
Depending on what kind of investment it is in, there may be a sales fee to convert it to cash.
They have the real answers tho, why ask us instead of them ?
2007-01-30 08:37:07 · answer #8 · answered by kate 7 · 0⤊ 0⤋
Dean is right....When you are older & better at math, you may come to realize that the $200 you got when you cashed out (after taxes and penalties) would have grown into enough money to buy a nice boat, if only you'd left it alone!
Ah, the miracle of compound interest!
2007-01-30 10:14:04 · answer #9 · answered by Anonymous · 0⤊ 0⤋
I believe you can only withdraw if you have a hardship. If you do they can charge quite a bit, up near 30% or more! You should be getting quarterly statements and there should be a phone number or website on them.
2007-01-30 08:33:07 · answer #10 · answered by lcritter55118 4 · 0⤊ 0⤋