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I've searched the internets extensively but I am finding it surprisingly difficult to find a straightforward answer to a very simple question.

Assuming I leave the company, can I just withdraw all the money in my 401k account, including the company's match, minus the 10% penalty & taxes? Or do I need a valid "hardship" reason and/or wait until I'm 59 1/2?

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    You do know you can roll your 401k into a new employer's program, and/or roll it over into an IRA without any penalties? Also, you can withdraw up to $10,000 penalty free (you still pay taxes) if you use it on a house down payment (not always the smartest move, but if you really want to use it, that's a fairly good use). – SnakeDoc Jul 12 '16 at 17:54
  • @SnakeDoc: yes, the issue is if I have to leave the US, for various reasons it might be more useful to just take it out. – houbysoft Jul 13 '16 at 0:05
  • Well, you can certainly have an IRA and be outside the US (and IRA is not tied to any company, and you can move it around between IRA providers if you decide you don't like one for any reason). There are very few really good reasons to raid your tax sheltered retirement accounts (and they were designed to be as such). – SnakeDoc Jul 13 '16 at 14:47
  • @SnakeDoc that depends on the laws of the home country though. Just as the US completely ignores tax shelter laws for pensions/retirement savings in other countries, other countries could not care less about the US tax sheltering the IRAs. In some places having an account out of the country may be illegal, in which case the OP may just be forced to withdraw. – littleadv Jul 19 '16 at 4:37
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    @SnakeDoc where did I say anything about "penalty free"? What I said was that sometimes people may be better off paying the penalty and closing the account. – littleadv Jul 21 '16 at 16:42
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As long as you're willing to pay the taxes and the penalties, once you're no longer employed you're allowed to do whatever you want. You can always do an "direct roll-over" (See IRC Sec. 401(a)(31)(A) which mandates this) and then withdraw from another qualified account, thus creating a withdrawal, if they refuse to just mail you a check (Why would they care? Don't know).

The match may have some vesting restrictions, though. Your own contributions - are yours to do with whatever you feel like.


That said, just pointing out the obvious - it's a very bad idea. Unless you expect to die before you're 60 and don't want to leave a dime to your heirs, you would probably be better off leaving it in a tax-sheltered account. If the custodian is bad - just roll over elsewhere, there's tons of excellent IRA providers.

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  • Comments are not for extended discussion; this conversation has been moved to chat. The system alerts mods when comments continue to this extent. – JTP - Apologise to Monica Jul 15 '16 at 2:30
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    In the chat noted in the comment by @JoeTaxpayer, there's some convincing evidence that this answer is completely wrong. Unfortunately the chat will not persist, but see the answer by Chris below. – user32479 Jul 19 '16 at 1:21
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    I encourage people to follow the link to the law that @littleadv has cited and read it carefully. It certainly does not support his position, even if ultimately he is correct for other reasons. – user32479 Jul 19 '16 at 5:45
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    @JoeTaxpayer The text at (31)(a) starts: "A trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that if the distributee of any eligible rollover distribution ..." [Emphasis added]. The question is what constitutes an eligible rollover distribution, and this paragraph does not answer that. If you have an eligible rollover then this paragraph says the sponsor has to provide a mechanism to make it a direct rollover. It does not say (here) which rollovers are eligible. – user32479 Jul 19 '16 at 14:18
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    @JoeTaxpayer If you go down to (31)(D), it defers the definition of "eligible rollover distribution" to another section. If you go there, IIRC, it further defers it yet elsewhere. I followed that rabbit hole for a couple of hops and never saw anything supporting this answer. I do allow that it might be there somewhere, but I looked for a while and could not find it. – user32479 Jul 19 '16 at 14:20
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Most plans yes, but it depends on your specific plan's provisions.

You want to get a Summary Plan Description for your specific plan. Speak with HR (assuming you have one, or whoever is in charge at your company) and request a Summary Plan Description (they are legally required to provide you with one if you ask, although there may be a small cost to you for printing). It will tell you in there when distributions may be made following severance of employment as it pertains to your specific plan.

An excerpt from the doc submitted to the IRS for plan approval -

enter image description here

option g would be the choice that's available, and participant should watch out for.

This is the response (a small excerpt, the full doc ran 2 pages and had private information) -

enter image description here

It confirms the full document (the plan itself) was approved.

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  • -1. You're wrong, I'm sorry. See IRC Sec. 401(a)(31)(A) and 401(a)(31)(C) which are directly related to what I said in my answer. – littleadv Jul 19 '16 at 4:33
  • For those who have commented on the lack of a reference saying this is ok, I'd point out that the default (at least in USA) is that anything not forbidden is allowed. (You similarly won't find a law that says you're allowed to change your cloths at noon. There may be some specific places where it's not allowed, and you could find those prohibitions written somewhere, but otherwise the government is out of it.) – user32479 Jul 19 '16 at 13:30
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    @Chris - can you confirm that (a) the box in question is in fact used for the standard 401(k) plan that we are used to, and not a defined benefit plan or other pension, and (b) whether you've administered any plan that checked that box? – JTP - Apologise to Monica Jul 19 '16 at 23:33
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    The recent links you gave seem to confirm your position, and I've given the answer an upvote. So, accepting this as fact, we are left to always need to warn people to check the Summary Plan Description for their post employment options, warning that even at say, 62, withdrawal or transfer may not be an option. – JTP - Apologise to Monica Jul 21 '16 at 1:13
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    With your permission, I'd like to move the evidence (from chat) to your answer. I have the images and can redact any numbers that lead to your company. That, and the links, offer the Black Swan I was requesting. – JTP - Apologise to Monica Jul 21 '16 at 16:22

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