View Full Version : Cancel out 401k
tazzy60
Jan 6, 2009, 09:28 AM
I want to quit my 401k. I am employed with same company that has my 401k. They are telling me ,I can't quit. It is my money. Is there anything I can do?
I put in for a hardship withdraw for tuition and they wanted an invoice! Do I have any choices?
ebaines
Jan 7, 2009, 11:42 AM
What do you mean by "quit" your 401(k)? Do you mean you want to make a withdrawal? If so, then the company is required to allow you to do so only if you have a "hardship," which the IRS defines as follows:
1. Un-reimbursed medical expenses for you, your spouse, or dependents.
2. Purchase of an employee's principal residence.
3. Payment of college tuition and related educational costs such as room and board for the next 12 months for you, your spouse, dependents, or children who are no longer dependents.
4. Payments necessary to prevent eviction of you from your home, or foreclosure on the mortgage of your principal residence.
5. Funeral expenses
6. Repair of a primary residence.
Your employer wants to see a tuition invoice so as to be sure you are using the money for that purpose. Also, note that even though you may qualify for a hardship withdrawal, you will still be liable for both income taxes and the 10% early withdrawal penalty on te amount you withdraw. You would be better off taking a loan from your 401(k) rather than a withdrawal - loans do not trigger income tax nor the penalty.
Fr_Chuck
Jan 7, 2009, 12:00 PM
While most of it is your money, often there are matching funds that don't vest for a number of years, But due to the tax status, you can not just take the money out. You may stop having money put in.
For a hardship you merely have to show proof of that hardship, you asked for money for school, so merely provide them a copy of the statement from the school, no issue then