Cancel your 401(k)?
Is it possible to cancel my 401(k) without showing hardship?
Paddy Hirsch Aug 14, 2012 Senior Editor, Marketplace
Hi Curtis. The answer is, yes, you can. But…
This from TurboTax:
Unfortunately, you could pay a big price for withdrawing your funds: You will owe income tax on the amount you withdraw, just as you would had you withdrawn it in retirement. And, if you are under age 59-1/2 years old, you will probably have to pay a 10 percent early withdrawal penalty that’s included as part of your income taxes.
This from 401kcalculator.org:
- You have several options regarding your 401(k) plan when you change employers.
- You can choose to rollover your 401(k) account to your new employer’s 401k by telling your plan administrator. You will also have to complete some paperwork.
- You can also elect to leave your 401k plan with your former employer, although this is not always recommended.
- Your third option is to rollover your 401k into a new retirement savings plan such as an IRA.
This from TurboTax on the hardship issue:
- Some plans let you withdraw money outright for certain financial and medical hardships before you reach that age, although they are not required to do so.
- You can take a 401(k) hardship distribution if your plan allows it and you have what the IRS calls “an immediate and heavy financial need.”
- Depending on your plan’s rules, the following needs could qualify:
- Payment needed to prevent eviction from, or foreclosure on, your principal residence.
- Certain medical expenses
- Burial or funeral expenses
- Cost of repairing damage to your principal residence
- Cost of purchasing your principal residence
- Tuition and related educational fees and expenses