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At Fleming Financial Services, Inc., our role is to assist our clients in defining and realizing their financial objectives and goals. We work with our clients to implement personalized plans designed for their unique situations. Our areas of concentration are: Retirement planning, Estate and Wealth Transfer strategies, and Business Continuation planning. We emphasize the importance of conducting our business with integrity and professionalism. As a member of PartnersFinancial, an independent national financial services company, we are able to provide access to sophisticated resources for the benefit of our clients. Some of the professionals with our firm are currently registered to conduct business through NFP Securities, Inc. With those additional resources in place, we help facilitate the complex corporate and personal financial decisions our clients must make.
In-Service Withdrawals from 401(k) Plans - Part 1
Fleming Financial Services, PA, 401KYou may be familiar with the rules for putting money into a 401(k) plan. But are you familiar with the rules for taking your money out? Federal law limits the withdrawal options that a 401(k) plan can offer. But a 401(k) plan may offer fewer withdrawal options than the law allows, and may even provide that you can't take any money out at all until you leave employment.  However, many 401(k) plans are more flexible. First, consider a plan loan Many 401(k) plans allow you to borrow money from your own account. A loan may be attractive if you don't qualify for a withdrawal, or you don't want to incur the taxes and penalties that may apply to a withdrawal, or you don't want to permanently deplete your retirement assets. (Also, you must take any available loans from all plans maintained by your employer before you're even eligible to withdraw your own pretax or Roth contributions from a 401(k) plan because of hardship.) In general, you can borrow up to one half of your vested account balance (including your contributions, your employer's contributions, and earnings), but not more than $50,000. You can borrow the funds for up to five years (longer if the loan is to purchase your principal residence). In most cases you repay the loan through payroll deduction, with principal and interest flowing back into your account. But keep in mind that when you borrow, the unpaid principal of your loan is no longer in your 401(k) account working for you. Withdrawing your own contributions If you've made after-tax (non-Roth) contributions, your 401(k) plan can let you withdraw those dollars (and any investment earnings on them) for any reason, at any time. You can withdraw your pretax and Roth contributions (that is, your "elective deferrals"), however, only for one of the following reasons--and again, only if your plan specifically allows the withdrawal: • You attain age 59½ • You become disabled • The distribution is a "qualified reservist distribution" • You incur a hardship (i.e., a "hardship withdrawal") Hardship withdrawals are allowed only if you have an immediate and heavy financial need, and only up to the amount necessary to meet that need. In most plans, you must require the money to: • Purchase your principal residence, or repair your principal residence damaged by an unexpected event (e.g., a hurricane) • Prevent eviction or foreclosure • Pay medical bills for yourself, your spouse, children, dependents, or plan beneficiary • Pay certain funeral expenses for your parents, spouse, children, dependents, or plan beneficiary • Pay certain education expenses for yourself, your spouse, children, dependents, or plan beneficiary • Pay income tax and/or penalties due on the hardship withdrawal itself Investment earnings aren't available for hardship withdrawal, except for certain pre-1989 grandfathered amounts. ©2013 Broadridge Investor Communication Solutions, Inc. All rights reserved.