Get Money From a 401k Retirement Plan

Research the major rules and IRS requirements concerning withdrawals from a 401k plan. The IRS has many major rules regarding tax penalties, age restrictions and withdrawal amounts for all retirement plans. They also provide limitations to early withdrawals not defined as qualifying as conditions for obtaining money before the required age.

Determine if your situation qualifies for early withdrawal under your plan's restrictions and IRS conditions. Depending on your circumstance and the rules set by your company, you may qualify for exemption from paying income taxes or penalties. Certain conditions defined as "financial hardship" circumstances exempt you from paying a penalty. These conditions can include extraordinary medical expenses, purchase or avoidance of foreclosure of a home, as well as permanent disability or separation from service.

Consult your company's 401k plan to determine its specifics in regard to rules and limitations for early withdrawal. Most company plans have specifics as to qualifying circumstances, but also to tax penalties and age requirements. Most require, for example, that you must pay ordinary income taxes on the withdrawal money amount itself and a 10 percent penalty unless specific circumstances deem otherwise. Some companies' 401k plans offer loans as a way of borrowing from yourself. If they do, then the loan must be paid back to avoid penalties and interest, however, because the money taken out of the fund cannot grow and may miss a big swing in the market. If the employee is unable to pay the loan back due to hardship circumstances, then it is considered a premature distribution, and a 10 percent penalty and interest is required from the IRS.

Consult with a certified financial planner or other specialist to make the best possible choice. You may be able to seek advice from someone within the company's 401k plan or use your own. She can help determine what penalties and taxes might be avoided based on your circumstances, to help you decide if an early withdrawal is the best choice or to look at different options for obtaining money.