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    Xcruciating's Avatar
    Xcruciating Posts: 1, Reputation: 1
    New Member

    Jul 5, 2007, 03:15 PM
    401(k) plan
    My company I work for has a 401(k) plan that I have contributed to and now I just recently stopped.I was told I couldn't receive my money unless I quit.Just doesn't sound right?
    ebaines's Avatar
    ebaines Posts: 12,130, Reputation: 1307

    Jul 5, 2007, 03:43 PM
    Quote Originally Posted by Xcruciating
    my company i work for has a 401(k) plan that I have contributed to and now I just recently stopped.I was told I couldn't recieve my money unless I quit.Just doesn't sound right??
    Well, they're right, sort of. Let me explain.

    As long as you are working for the company you are a participant in their 401(k) plan, and you do not have the option to roll the money over to an IRA. That would perhaps be something a lot of us would like to do - depending on the investment choices in your 401(k) you may be able to so better with your own self-directed IRA. However, the rules are such that you can't do this unless you leave the company. I suppose they made it this way to ensure some stability of the employees' investment pool.

    However, if you want access to the money while still an employee you have two options, neither of which I would recommend except under dire circumstance:

    1. You can take a withdrawal, and pay a penalty of 10% of the amount plus income tax on the amount (assuming you don't qualify for a hardship withdrawal). I strongly discourage you from doing this. The money you have saved in the 401(k) is for your retirement, and it would be a mistake to blow that on something (short of a real crisis).

    2. You can take a loan against your vested amount. Under this plan you can loan yourself some money, and use your pay check contributions to pay yourself back. The good news is there is no penalty, unless you fail to pay yourself back. The bad news is that while you have the loan outstanding you are disqualified from continuing to invest in the 401(k). If you're not careful, you may find that you are not saving enough for retirement.

    Now, you say you have stopped contributing to the 401(k) -- I would strongly recommend that you find some way to get back in and start contributing at least a nominal amount. When you get to retirement I fear that none of us will be able to rely on pensions or Social Security like our parents did, so be sure to take care of yourself and plan properly for your future!

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