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  • Feb 15, 2011, 11:08 AM
    Terminal cancer - Wanted to cash out 401K
    I am 57. Given 6 to 18 months to live. Wanted to fulfill some "bucket list" items. Found out I can't get my 401K money. I can borrow 50% but then I have to do a payment plan to put it back. I am still with my employer on short term disability which will lead to long term disability. It seems as though terminal cancer would be a good reason for allowing a cash out of a 401K. I am not going to live to use it to retire. But that is not in the "rules". My employer stopped contributing 2 years ago and I just stopped contributing. I had no problem cashing out another 401K I had with a former employer. This seems to hinge on the fact that I am still "with" my present employer.
    I wonder if I can roll it over to an IRA and then cash out the IRA?
    Any help appreciated.
  • Feb 15, 2011, 02:10 PM

    While still emplloyed with the company that has your 401(k) there are only a few "hardships" cases under which an employer is obligated to allow you to take a withdrawal. They are:

    1. Expenses for medical care previously incurred by the employee, the employee's spouse, or any dependents of the employee or necessary for these persons to obtain medical care;
    2. Costs directly related to the purchase of a principal residence for the employee (excluding mortgage payments);
    3. Payment of tuition, related educational fees, and room and board expenses, for the next 12 months of postsecondary education for the employee, or the employee's spouse, children, or dependents;
    4. Payments necessary to prevent the eviction of the employee from the employee's principal residence or foreclosure on the mortgage on that residence;
    5. Funeral expenses; or
    6. Certain expenses relating to the repair of damage to the employee's principal residence.

    So you are correct - if you don't have one of these hardships the only way to make a withdrawal is to quit the company. Because of your age you could then take withdrawals without the 10% early withdrawal penalty.

    As for rolling it to an IRA - you may want to ask your HR department or plan administrator about it, but it is highly unlikely that it would be allowed, as long as you are an active employee.

    My suggestion would be to take a loan. Yes it puts you on a payment plan, but the loan is tax-free. Just be aware that if you leave the company before paying it all back the amount outstanding is automatically converted into a distribution (and becomes immediately taxable).
  • Feb 15, 2011, 02:37 PM
    Comment on ebaines's post
    Thanks ebaines. I just find it hard to believe that terminal cancer does not constitute all rules being pulled off the table and the money can be paid out. I'm not concerned about the penalties/taxes. My doctor will sign anything saying I have Stage 4B cancer that has metastasized to my colon, liver and lungs. This is not curable and final stage cancer. I just want to be able to use the money to improve the life I have left.
    Also, the maximum loan repayment period is five years. So that means I would have to make a $400 a month payment to put the money back. It's ridiculous I have to put money back into a "retirement" plan when I won't live to the 59 1/2 years old to start collecting.
    Thanks for letting me vent.

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