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Facts About 401k Withdraws

Taking out early withdrawals from your 401k can hurt your retirement. But if you need to take money out now here is some 401k Regulations to help you understand your options.

1. Cash Out

The first option is to cash out your 401k. If you do then you will be given a check for 80% of your account. The rest will be withheld to pay for taxes. If you are under the age of 59 ½ you will also have to pay a 10% early withdrawal penalty on your money. So keep this in mind.

2. 401k Withdrawal

If you are in a time of trouble and need money you can take out a withdrawal for the amount that you need. Like the last option you will have to pay taxes and an early withdrawal penalty on the money if you are under the age of 59 ½

3. Loans

Another option is to take out somthing called a 401k loan. Like the name suggest this is a loan and it comes with a low interest rate as well as no background check. It is not technically a withdraw, but it does allow you to tap into your account without any of the repercussions that come with traditional withdraws. Before taking out a loan make sure that you do have the means to repay it because if you fail to do so it will be counted as a withdraw and you will have to pay taxes and penalties on it.

4. Rolling it

The last option is one of the most creative. This is technically called a 401k account to IRA account rollover. When you perform a rollover you will be given a check for your account balance minus 20% withheld from taxes and will have 60 days to deposit it into an IRA. During those 60 days you can use the money as you like, but as long as you deposit the money into your IRA it will not count as a withdraw.

In a sense it is like taking out a short term loan with a high interest payment. It can be a great way to get cash now if you are going to be able to come up with the money later. But if not it will be counted as a withdrawal.

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