FINANCE
401K Withdrawal Rules
A
s the economy becomes more and more unstable, people are looking
at ways of accessing retirement money in their 401k plans. Rolling the money over from one account to another is very easy. Getting your hands on the money is extremely difficult. Unless of course you are 59 1/2. The government does allow people to access retirement funds when dealing with hardship. Hardship withdrawals must fall within strict parameters in order to avoid stiff penalties. There are two basic methods for withdrawing money from your 401k. 1) Wait until you are 59 1/2 to start collecting money from your retirement plan. You will pay 20% in taxes and can choose to take a lump sum amount or take the minimum amount required in monthly payments. Another option is to leave the money there if it is more than $5,000 and allow it to accrue inter- est even longer. After 70 1/2 you are re- quired to take the minimum amount. 2) If you are below age 59 1/2, you
can still access your money, but regula- tions require that you pay a 10% early payment penalty, plus the 20% in tax- es.
Hardship withdrawals allow you to
access your retirement money before you actually retire without the steep 10% penalty. Use retirement funds as a last resort for bailing yourself out. It is called a hardship withdrawal for a good reason. Your retirement might be much more frugal if you use that money at a younger age rather than at retirement age. Penalty fee waivers have been put in place for the following:
Health Insurance:
If you are paying for health insur-
ance because you have been unem- ployed for the last twelve weeks can waive the fee.
42 HISPANIC NETWORK MAGAZINE
Higher Education:
Going to college and paying tuition
for higher education with the money can cut you a break.
Disability:
If you have a qualifying disability
that leaves you unable to work, the penalty fee may be waived.
Home ownership:
In some cases, using the money as a
first time home buyer may allow you to avoid the penalty as well.
High medical expenses:
Certain medical expenses that ex-
ceed 7.5% of your adjusted gross in- come qualify.
Celebrating 18 Years of Diversity
Wanting a new car is not justifica-
tion to dip into retirement funds, and the government discourages such ac- tion with the high penalty that hope- fully makes people withdrawing it. However, if you receive IRA money as a beneficiary, a penalty fee is not at- tached since the investor died. The age requirement does not apply to the ben- eficiary. If you are willing to part with a
large chunk, the remaining money can be yours. The government will ask for their percentage of the money. Unfor- tunately tax shelters don’t shelter you from taxes forever. Retirement can be the best years of your life assuming you set aside money throughout the rest of your life. Proper planning will insure access to your money with as few fees and penalties and possible.
Source:
articlesbase.com
www.hnmagazine.com
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