subject: All About Withdrawing Funds From The 401k Plan [print this page] When someone is trying to tell you the benefits of a 401K plan, that person is likely to tell you so many good things about this retirement plan. However, it is important to take note of the fact that many people will not really tell you about nay challenges that you are likely to face if you choose to go with this savings plan. One of the biggest challenges that you are likely to face when it comes to the issue of the 401K plans is the issue of withdrawal.
One thing that you ought to note is the fact that many employers will not allow you to withdraw your money easily. This is especially true if at all you will still be working with the company and you will not yet have reached 59.5 years. If you would like to withdraw your money before you turn the age of 59.5, you will be exposed to an excise tax that will total to 10% of the amount to be withdrawn. The reason why this is done is to make sure that people do not have a tendency to go for instant gratification instead of going for delayed gratification that is actually the basis of any solid savings plan.
Apart from allowing you to withdraw your cash from the 401K plan, the employer can also choose to allow you to take a loan from the plan. This is usually much easier than withdrawing your funds from the savings plan. When you take a loan from the 401K plan, you will be required to pay the money with interest. This interest rate is pre-determined, and the amount that you will pay will be redirected into the fund so that it accumulates you balance. In addition to this, you will not have to face the 10% penalty that people who are withdrawing their money will be facing.
It is however important to take note of the fact that the loan that you take from your contributions should be repaid within five years. However, if you are planning to use the money in the purchase of a primary residence, then you need not worry because the law does allow you to extend the term of the loan.
However, it is extremely important to take note of the fact that if you want to know more details about the conditions for withdrawal, I would advise you take more time to study the laws.
