www.kiplinger.com Open in urlscan Pro
151.101.194.114  Public Scan

Form analysis
1 forms found in the DOM

GET https://www.kiplinger.com/search

<form class="search__form" action="https://www.kiplinger.com/search" method="GET">
  <span class="icon icon__search icon__search--dark icon__search--fill"><svg class="icon-svg" xmlns="http://www.w3.org/2000/svg" viewBox="0 0 1000 1000">
      <path d="M720 124a422 422 0 1 0-73 654l221 222 132-131-222-222a422 422 0 0 0-58-523zm-92 504a291 291 0 1 1-412-412 291 291 0 0 1 412 411z"></path>
    </svg></span>
  <input type="search" name="searchTerm" autocomplete="off" placeholder="Type to search..." class="search__term">
  <button type="submit" class="search__submit">Search</button>
</form>

Text Content

kiplinger Kiplinger


Save up to 74%

Subscribe to Kiplinger

×
Search
 * 
 * Investing
 * Taxes
 * Retirement
 * Savings
 * Credit Cards
 * Advisor Collective
 * More
   * Personal Finance
   * Building Wealth
   * Homes
   * Business
   * Kiplinger Economic Forecasts
   * Travel
 * My Kip
   * Store
   * Manage my e-newsletters
   * My subscriptions
 * Subscribe
   * Kiplinger's Personal Finance
   * The Kiplinger Letter
   * The Kiplinger Tax Letter
   * Kiplinger's Investing for Income
   * Kiplinger Retirement Report
   * Kiplinger's Retirement Planning
 * 

Newsletter sign up Newsletter




When you purchase through links on our site, we may earn an affiliate
commission. Here’s how it works.

Advertisement Feature
 1. Home
 2. retirement


WITHDRAWING FUNDS FROM YOUR 401(K) PLAN BEFORE YOU RETIRE

While taking money out of your 401(k) plan is possible, it can impact your
savings progress and long-term retirement goals, so it’s important to carefully
weigh the risks, costs and benefits.

 * 
 * 
 * 
 * 
 * 
 * Newsletter sign up Newsletter

(Image credit: Ameriprise)

By Ameriprise Financial
published 10 days ago

Borrowing or withdrawing funds from your 401(k) before you retire is a big
decision. After all, you’ve worked hard and saved hard to build up your
retirement fund.



Most people have two options:

 * A 401(k) loan
 * A withdrawal



Whether you’re considering taking out a loan against your 401(k) vs. a
withdrawal, a financial advisor can help you make an informed decision that
considers the long-term impacts on your financial goals and retirement.


SUBSCRIBE TO KIPLINGER’S PERSONAL FINANCE

Be a smarter, better informed investor.

Save up to 74%



SIGN UP FOR KIPLINGER’S FREE E-NEWSLETTERS

Profit and prosper with the best of expert advice on investing, taxes,
retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

Here are some common questions and concerns about borrowing or withdrawing funds
from your 401(k) before retirement.


A 401(K) LOAN

A 401(k) loan allows you to take out a loan against your own 401(k) retirement
account, or essentially borrow money from yourself. While you’ll pay interest
similar to a more traditional loan, the interest payments go back into your
account, so you’ll be paying interest to yourself.



People borrow against their 401(k) for a variety of reasons, such as funding the
purchase of a house or paying for a dependent’s college tuition. While there are
some plans that only allow participants to take a loan for certain approved
reasons, in most cases, you won’t need to declare why you are borrowing from
your 401(k).


COMMON 401(K) LOAN QUESTIONS:

Can I take out a loan against my 401(k)?
Check with your plan administrator to find out if 401(k) loans are allowed under
your employer’s plan rules. Keep in mind that even though you’re borrowing your
own retirement money, there are certain rules you must follow to avoid penalties
and taxes.

How much can I borrow against my 401(k)?
You can borrow up to 50% of the vested value of your account, up to a maximum of
$50,000 for individuals with $100,000 or more vested. If your account balance is
less than $10,000, you will only be allowed to borrow up to $10,000.

How often can I borrow from my 401(k)?
Most employer 401(k) plans will only allow one loan at a time, and you must
repay that loan before you can take out another one. Even if your 401(k) plan
does allow multiple loans, the maximum loan allowances, noted above, still
apply.

What are the rules for repaying my 401(k) loan?
In order to be compliant with the 401(k) loan repayment rules, you’ll need to
make regularly scheduled payments that include both principal and interest, and
you must repay the loan within five years. If you’re using your 401(k) loan to
buy a primary residence for yourself, you may be able to extend the repayment
period.

What if I lose my job before I finish repaying the loan?
If you leave or are terminated from your job before you’ve finished repaying the
loan, you typically have 60 days to repay the outstanding loan amount.

What happens if I don’t comply with the 401(k) loan repayment rules?
Failure to follow the 401(k) loan repayment rules may result in tax penalties in
addition to a 10% early withdrawal penalty.

Swipe to scroll horizontally

Summary of loan allowancesIf you have this much vested in your 401(k):Standard
rules allow you to borrow up to this much:$100,000 or more$50,000$10,000 to
$100,00050% of your vested value$10,000 or less$10,000

Swipe to scroll horizontally

Pros and cons of 401(k) loansAdvantages of a 401(k) loanDisadvantages of a
401(k) loan Getting a 401(k) loan is generally a quick, easy processMoney
removed from your 401(k) will not be able to grow and will not benefit from the
effects of compound interestIf you follow the 401(k) loan repayment rules, you
won’t be subject to taxes or penalties on the loan amountIf you don’t follow the
401(k) loan repayment rules, you may be subject to taxes and penaltiesYou don’t
need a credit check for a 401(k) loan, and your credit won’t take a hit if you
defaultIf you lose (or leave) your job while the loan is outstanding, you
typically will have to repay your 401(k) loan within 60 daysInterest paid on the
loan is not lost to a lender, because you are the lenderYou must replace the
money you borrowed from your 401(k) with post-tax dollarsThere are no early
repayment penalties if you pay off the loan earlyYou can’t deduct loan interest
payments for tax purposes


WITHDRAWALS FROM A 401(K)  

401(k) hardship withdrawals
If you find yourself facing dire financial concerns and need cash urgently, your
401(k) plan may offer a hardship withdrawal option. Unlike taking a loan against
your 401(k), you won’t have to repay the money you take out, but you will owe
taxes and potentially a premature distribution penalty on the amount that you
withdraw. In addition, IRS 401(k) hardship withdrawal rules state that you may
not take out more money than what is needed to cover your hardship situation.

In order to qualify for a 401(k) hardship withdrawal, your plan administrator
must offer this option (not all of them do), and you must be facing an
“immediate and heavy financial need.” 

Approved 401(k) hardship withdrawal reasons include:

 * Postsecondary tuition for you or your family
 * Medical or funeral expenses for you or your family
 * Certain costs related to buying, or repairing damage to, your primary
   residence
 * Preventing your immediate eviction from or foreclosure of your primary
   residence

If you experience financial hardship from a circumstance not on this list, you
may still be able to qualify for a hardship withdrawal, so check with your plan
administrator.

In-service, non-hardship withdrawals
This type of withdrawal is only allowed under certain plans and is mainly used
by those who would like to explore other investment options. Learn more
about in-service distributions. An Ameriprise financial advisor can provide more
detailed information on in-service 401(k) distributions.

Swipe to scroll horizontally

Pros and cons of withdrawing money from your 401(k)ProsConsYou’ll get access to
cash quicklyYou’ll be taxed on the amount that you take outRow 1 - Cell 0 If
you’re under 59.5 years of age, you’ll be subject to a 10% 401(k) withdrawal
penaltyRow 2 - Cell 0 It may affect your long-term retirement savings goals

Withdrawing vs. cashing out your 401(k)
Withdrawing money from your 401(k) is not the same thing as cashing out. You can
do a 401(k) withdrawal while you’re still employed at the company that sponsors
your 401(k), but you can only cash out your 401(k) from previous employers.
Learn what to do with your 401(k) after changing jobs.

401(k) loan vs. withdrawal
Taking money out of your 401(k) plan is a big decision that can impact your
savings progress and long-term retirement goals. If you’re contemplating this
option, consider connecting with an Ameriprise advisor. They’ll work with you to
carefully weigh the risks, costs and benefits.

DISCLAIMER

Do not use this information as the sole basis for investment decisions; it is
not intended as advice designed to meet the particular needs of an individual
investor.

Be sure you understand the potential benefits and risks of a 401(k) loan or
withdrawal before implementing. As with any decision that has tax implications,
you should consult with your tax adviser prior to implementing an IRA rollover.

Ameriprise Financial cannot guarantee future financial results.

Investment products are not insured by the FDIC, NCUA or any federal agency, are
not deposits or obligations of, or guaranteed by any financial institution, and
involve investment risks including possible loss of principal and fluctuation in
value.

Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice.
Consumers should consult with their tax advisor or attorney regarding their
specific situation.

Ameriprise Financial Services, LLC. Member FINRA and SIPC.

© 2023 Ameriprise Financial, Inc. All rights reserved.

This content was provided by Ameriprise. Kiplinger is not affiliated with and
does not endorse the company or products mentioned above.



Ameriprise Financial
Social Links Navigation
Latest





 * 
 * Tax Relief for Maine and Massachusetts Following Hurricane Lee
   
   Tax Deadline Following Hurricane Lee, the IRS has granted tax relief for
   Maine and Massachusetts taxpayers. Here are the payments and filings that
   qualify.
   
   By Katelyn Washington Published 13 hours ago

 * Three Strategies to Build Wealth and Secure Your Financial Future
   
   Here are three strategies to keep in mind as you embark on your path to
   wealth accumulation and financial security.
   
   By Justin Donald Published 15 hours ago

   

kiplinger
 * About Us
 * Contact Future's experts
 * Terms and Conditions
 * Privacy Policy
 * Cookie Policy

Kiplinger is part of Future plc, an international media group and leading
digital publisher. Visit our corporate site.
© Future US, Inc. Full 7th Floor, 130 West 42nd Street, New York, NY 10036.