The Impact Of 401K Withdrawals On Your Retirement Income

When you retire, you will be stripped of your regular income, good thing you can prepare today through a 401K retirement savings plan. So, it’s justifiable that plan administrators will put restrictions on any attempt of the enrolled individual to get hold of his or money through 401K withdrawals. Luckily, for those with no other ways to get money, they can still withdraw cash from the plan if they qualify.


You have to know that you will be slapped with penalties if you decide to withdraw your money from the plan too soon, meaning you are not yet in your retirement years. In fact, 401K withdrawals indicate that you are ready to lose benefits offered by the plan. If you are younger than fifty-nine and a half, the penalty will be ten percent early distribution penalty tax. Also, there’s a big possibility that you will no longer be eligible for future investment growth if you opt for 401K withdrawals. Also, once you withdraw money from your account, you will find it hard to replace it as there’s an annual limit in the contribution.


However, when you will face money problems that require quick action, you can turn to 401K hardship withdrawal. This is an alternative to those who cannot secure 401K loans. It will be needed to address a financial need and the amount that will be withdrawn does not surpass the amount of what is needed. You should know that there are few things that this type of withdrawal is authorized by plan administrators and these include if you have unpaid medical expenses and college tuition and if you plan to buy a house. Remember that the penalties still apply in this withdrawal type.


That only means that you cannot easily withdraw cash to finance your foreign travel. It is really important to think twice before you will decide on 401K withdrawals. That is, if you want that you will be financially secure in the future. During your retirement years, you can do a lot of things that you missed when you worked. They can choose to travel abroad, stay in the house or socialize; it largely depends on them what they should do following retirement. If your preparation for your finances is well-planned, you will have a bright future ahead of you.

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