Cancel 401k and withdraw funds before 59 1/2.

[Guest Michael G.]

I have a plain and simple question. I think . I would like to cancel my 401k and withdraw 100 % of the funds.

I know about the 10 % penalty and 20% withholding. I am well under the age of 59 1/2. What options do I have , if any.

[Guest]

I am assuming you mean that you are working and have $ in a 401(k) plan.

You certainly are entitled to stop deferring, but that is not really 'cancelling' your 401(k). Your money still exists in an account.

There are only a few ways to get the $ out of a plan (after all, it is retirement money, the govt allow a tax break for you, etc. so you have to follow their rules as well)

plan might allow in service withdrawals (most I have seen don't)

plan might allow hardship withdrawals, but I stress the word hardship - you are supposed to have a valid reason.

I have actually talked to people who said not having a new truck or boat is a hardship

plan might allow loans - but those need to be paid back, and you wanted to simply get the money out.

so that leaves you with:

death (I doubt you are ready for that option)

termination of employment (it doesn't sound like you are ready to quit)

hmmmm. not a lot of other possibilities. again, retirement plans are designed to have $ put away for retirement. people may gripe about the rules, but then everyday you read in the paper that social security isn't enough for retirement (I don't think it ever was intended to cover everything). I don't mean that to sound 'negative'. It is just my belief that people can't expect the govt to bail them out.

[Guest LTurner]

Even if you quit, your plans trust document may not allow termination as a "triggering" event for distributions prior to normal retirement age (which the trust can specify) which is usually 65. But I have seen these with all kinds of dates. Best bet is talk to your employer and review the trust document options, and/or visit with the administrator.

hardship withdrawals are very tight - needing the money for a vehicle, new furniture, snowmobile, etc. would definitely not meet the requirements of a hardship.