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Drawing on your 401(k) early? Rollover to IRA first?


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    Is this a good idea, to draw on your 401(k) early? I was under the impression that you can easily withdraw early without the normal 10% penalty right now. But I'm reading it might not be as easy as all that.

    Getting a penalty-free 401(k) withdrawal may be more complicated than you think

    So what's the verdict, is this not a good idea like it originally appeared? Here's why its become complicated:

    Question extends to when this penalty exception goes away as well, do you see acceptable times when it makes sense to withdraw early or are you fully against it? Also hear of people talk about rolling over your 401(k)s into IRAs, but not sure how that works and the exact benefit of doing so.. Fill me in about that too, if you can. Thanks.

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    WyattTown Wrote:

    Is this a good idea, to draw on your 401(k) early? I was under the impression that you can easily withdraw early without the normal 10% penalty right now. But now I'm reading it might not be as easy as all that.

    Getting a penalty-free 401(k) withdrawal may be more complicated than you think

    So what's the verdict, is this not a good idea like it originally appeared? Here's why its become complicated:

    Unfortunately, getting a related distribution, or CRD, isn’t available to everyone. While Congress made it easier to take a withdrawal without incurring any penalties, it’s not guaranteed. Retirement plan providers read the new law’s withdrawal exemption as an optional plan feature, which means that the decision whether to offer this benefit rests with the employer.

    This is a so-called “plan event” and is something that needs to be signed off on by the company, says Michael Hadley, a lawyer with the D.C.-based law firm Davis & Harman

    Question extends to when this penalty exception goes away as well, do you see acceptable times when it makes sense to withdraw early or are you fully against it? Also hear of people talk about rolling over your 401(k)s into IRAs, but not sure how that works and the exact benefit of doing so.. Fill me in about that too, if you can. Thanks.

    From what I understand, only those who were affected by this exact situation financially are allowed the 401k hardship-distribution. I'm not sure of the exact allowances here, but I assume there are definitely alot of stipulations that come with them. It would be really hard to prove how people were affected in some cases.

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    I'd say that if you find yourself in hard financial times, absolutely do it. What's the point of having a 401 k, when you're struggling to stay afloat? Especially if you're not sure if you'll still have a job or not in the coming months.