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When Can I Take Money Out of My 401K?

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  • When Can I Take Money Out of My 401K?

    Today's economic state has many people wondering, 'when can I take money out of my 401k?'. The 401k is meant to last until you are at least 59 at which point you can begin withdrawing money. You must start taking money out of your 401k by age 70. However, what about those people who have been affected recently by the recession and wonder 'when can I take money out of my 401k'? You can take money out of your 401k but you will be charged exorbitant fees for doing so. You can take 401k money out for education or the purchase of a home without penalty and just pay them back with interest over time.

    The interest actually goes right back to your 401k account so you never lost anything. If you have at least $1,000 invested in your 401k and you leave your current employer you have two choices. You can either roll the monies into your new 401k or you could convert your monies to an IRA. At this point you could opt to cash out your 401k. If you do so you will need to check with your financial institution for the penalty fees and costs associated with doing so. Statutes regulating restrictions on loans place no specific constraints on what the loan is being used for. Per government guidelines 401k loans must be readily available to everyone.

    Now, your employer may be a different story apart from the 401k guidelines listed. Your employer can actually deny withdrawing funds from your 401k plan. Your employer is not required to allow this as many small businesses have opted out of this option due to the added costs. If your employer does allow early withdrawal you would need to check with your human resources department for details, penalties and fees.

    Typically an individual can borrow up to 50% of their vested 401k account balance. At the same time many 401k plans will not allow you to take out money against your 401k unless you take out a minimum of $1,000. The number of loans an individual takes out against their 401k may be restricted as well.

    So to answer the age-old question 'when can I take money out of my 401k?', you can take money out at any time, per 401k guidelines. There is a slight chance your company has restrictions. Talk to you human resources department and make sure you are aware of the penalties and costs associated with this.

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