Having a 401K Plan has several benefits, and would be a good way to prepare for retirement. You have to remember though that you would not be able to withdraw from this account until you are at least 59 /12 years old without going through several restrictions.
One advantage of the 401K Plan is that the amount you and your employer contribute to it as well as any earnings it has made from investments using your capital are tax-deferred. Withdrawing from your 401K account before you reach 59 could mean you will be taxed for the amount withdrew based on your income bracket. On top of this, you could also be penalized for no less than 10% of this amount.
There are cases when these penalties may not be applied. It is possible to make a withdrawal from your 401K Plan without penalties if you could prove that you are in financial hardship. You would need to present proof that you are in urgent need of cash to pay for emergency medical needs or college education fees for yourself or your spouse or children, if you are permanently disabled, and other similar conditions. Other possible cases that could exempt you from 401K withdrawal penalties would include a divorce settlement where your 401K Plan is part of it.
Outside of these circumstances, in all likelihood any 401K withdrawals would be correspondingly meted with taxes and the penalty. If you are in urgent need of financing, perhaps what you could do is to first look for other sources for the funds you need instead of withdrawing from your 401K account. A good alternative is to apply for a 401K loan, which is provided in many 401K plans, although not in all. Another alternative you could look into are consumer loan types.
401K Plans were created to help you prepare monetarily for retirement. Thus it would be beneficial if you could find other sources of funding for your current financial needs than withdrawing from your 401K plan.
One advantage of the 401K Plan is that the amount you and your employer contribute to it as well as any earnings it has made from investments using your capital are tax-deferred. Withdrawing from your 401K account before you reach 59 could mean you will be taxed for the amount withdrew based on your income bracket. On top of this, you could also be penalized for no less than 10% of this amount.
There are cases when these penalties may not be applied. It is possible to make a withdrawal from your 401K Plan without penalties if you could prove that you are in financial hardship. You would need to present proof that you are in urgent need of cash to pay for emergency medical needs or college education fees for yourself or your spouse or children, if you are permanently disabled, and other similar conditions. Other possible cases that could exempt you from 401K withdrawal penalties would include a divorce settlement where your 401K Plan is part of it.
Outside of these circumstances, in all likelihood any 401K withdrawals would be correspondingly meted with taxes and the penalty. If you are in urgent need of financing, perhaps what you could do is to first look for other sources for the funds you need instead of withdrawing from your 401K account. A good alternative is to apply for a 401K loan, which is provided in many 401K plans, although not in all. Another alternative you could look into are consumer loan types.
401K Plans were created to help you prepare monetarily for retirement. Thus it would be beneficial if you could find other sources of funding for your current financial needs than withdrawing from your 401K plan.
About the Author:
For more details on 401k rollover guide, please go to http://401krolloverguides.com/
No comments:
Post a Comment