Terminated, what about my 401k?

[Guest strawvan1]

I just got terminated from a job that I was at for almost 5 years. I do not think I will qualify for unemployment benefits and even if I do, it will be atleast 5 weeks before I get a check. I am thinking of taking my 401k money and using it to pay my rent, car loan and my son's high school tuition. Can I do this? If so how do I go about this and what will my penalties be? How fast can I get my hands on this money? I have no other financial sources available to me and I need money immediately. I am totally clueless about this subject.

[Tom Poje]

ouch.

The distribution issue depends on the plan document. My guess is that most allow distributions as sson as feasibly possible. If the plan year ends on Dec. 31, you might still be do any match or proft sharing contribution as well, again that depends on the document, and the company might delay distributions for this reason.

you would have to check with the human resource person, or check your summary of plan description booklet.

Getting distributions 'rapidly' is unusual, though to pay rent you would (should) qualify for a hardship distribution, again a lot depends on the terms of the plan document.

as for penalties, the following will happen.

Generally there will be 20% withholding on the amount of any distribution for taxes. There are some exceptions. Then when you file your tax return, you either get a refund or make up the difference, depending on your tax bracket. Assuming you have not attained age 55 this year, there will also be a 10% penalty you pay at tax time. Since the distribution would not occur until 2003, that would not show up for another year.

again, the best you can do is contact the human resource person for more info. Good luck.