Can I Withdraw Funds

You cannot withdraw funds from your 401k at any time, this is done for a number of reasons, mostly to protect your retirement savings. There are only two real times you'll be able to take money from your account-when you've reached retirement age, or for a brief period immediately after you've left a job. There are penalties, however, for taking funds from the account before you reach retirement age that will really take a large cut out of your savings. This is something that needs to be considered very carefully.

You can withdraw your funds normally after you reach retirement age, which is 59 years and 6 months old. You will have to pay taxes on these withdrawals, but that is because with a traditional 401k account your contributions were made from your pretax income-meaning that you put off paying the taxes on your earnings until making these withdrawals in retirement.

If you decide to take a payout before that time, when you've just left a job, you will have to pay both federal and state taxes, and a ten percent early withdrawal fee. This is a heavy price to pay, depending on what your percentages are it can add up to thirty to forty percent of your withdrawal total. Not only are you losing that money, but you're also losing the money this would have earned for you until you reached the point of retirement. Any financial expert you talk to will recommend you find some other way to secure funds than to take money from your 401k early because of these fees.

After careful consideration if you decide this is still what you need to do you'll want to get started immediately after you leave your employment. The company you worked for will hold twenty percent of what you withdraw for the penalty and taxes, and at the time you do your taxes at the end of the year you'll be responsible for paying whats left of what you owe on that withdrawal in your taxes, so make sure you save some of it for that.

Taking an early 401k withdrawal is a serious decision to make that will need to be carefully thought out and then planned for with your budget.