Can You Cancel your 401K Plan?

Question

I've been paying for my 401K for the last 6 months. Every 2 weeks my employer takes out money for my 401K. If I no longer want 401K will I get what I already taken out of my paychecks for the last 6 months? How does that work!?

Answer 1

You can stop your 401k deferrals at any time. Contact your HR and ask how to do that. You can't get your deferrals or the income on it until you quit, die, become disabled, or turn age 59 1/2. Once one of those 4 events take place simply contact your HR for the appropriate forms. Depending on who administers your plan you may be able to obtain those forms online.

Note: you can still access those funds via hardship or loans if your plan allows. You just can't take a full distribution of it.

If you do quit and take a cash distribution they will automatically withhold 20% of your account balance and submit that to the IRS. Then when you do your taxes for that year you will have to claim the distribution as income and pay an additional 10% extra tax (it's commonly called a penalty but it's just an extra tax). However, you also get to report the withholding. Depending on your tax bracket the 20% withheld may cover your taxes or if your tax rate is higher than 20% you will owe additional funds.

Answer 2

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RE:
Can You Cancel your 401K Plan?
I've been paying for my 401K for the last 6 months. Every 2 weeks my employer takes out money for my 401K. If I no longer want 401K will I get what I already taken out of my paychecks for the last 6 months? How does that work!?

Answer 3

You can cancel future contributions without a problem. However, withdrawing is more difficult. Some plans dont let you take it out unless you quit or retire. Others will let you, but you'll pay a 10% penalty on top of income tax (Becuase you didnt pay any income tax on the money that got put in there.)

401K plans are ALWAYS a good idea. Why not contribute just 1% of your pay?

Answer 4

Yes, you can set your contribution rate to 0% which will then stop the contributions to your 401K from your paycheck. You need to contact the financial institution that manages your 401K as your company cannot do this for you as they do not manage your 401K.

On a side note you may want to think twice about canceling your 401K plan as this saves you money on the taxes you owe.

Hope this helps!

Answer 5

Cancel 401k

Answer 6

Closing your 401K is not smart! You should keep and always contribute to it. Social security may not be around to collect from when you're old enough to get it, so you may need your 401K then more than you think. If you die before then, your spouse or your children benefit from it (or whomever you note as the beneficiary), but eliminating this option from your retirement plans is not a smart idea. Check out the gazillion sites on the internet that address this issue, and the benefits you incur from a 401K plan.

Answer 7

Your employer sets a plan that identifies eligible reasons for withdrawal. You can always stop contributing to a 401K but you can't always take the money out.

I you do are able to take the money out, the first answer that identifies a 40% penalty is fairly accurate.

401Ks save you income taxes in the long run and it is a great way to save for later in life. Especially if your employer has a matching program.

Just stop contibting and try to not take the money out.

Answer 8

It would work just like if you quit. If you quit your job and don't roll your 401k into another type of retirement account they will cut you a check. You will be taxed about 20% of the amount you have in there. You can also borrow from your 401k account if you just need money. Then you pay yourself back with interest. You can also choose to stop contributing and just keep the money in there, or you can lessen your contribution amount.

Answer 9

if you take out the money you will be taxed at 40% i would keep a 401k even if you need the money right now because it is non-taxable funds, and you should start an an early age saving for your retirement. but if you do decide to stop your 401k you can't get the money back with out them putting a tax penalty on the funds.

Answer 10

First and foremost, you should take this question to your company's HR department. They'll have information on your specific plan as well as help you get it done.

No, generally speaking, you can stop contributing to the account and leave it where it is. They'll stop taking money from your paycheck, and the money you've already contributed will remain invested.

If you want the money BACK, you're probably not going to see very much of it. Unless your company allowed you to be 100% vested immediately, you'll be forfitting a good chunk of the value. Not to mention the heavy taxes that are imposed on pulling retirement accounts early.

Like I said, talk to your HR rep. Their job is to help you with things like this.

Hope I helped at least a little.