Question about 401k withdrawals

[disneysteve]

I would probably just have to kiss our old 401k goodbye if the other plan didn't allow rollovers or withdrawals. They were charging so much in fees that we were losing money every month.

So were you just putting money in and then taking it right out as a rollover?

[Captain Save]

Wow, I'm really surprised to hear that some employers don't allow withdrawals. We can request withdrawals online on both of our retirement accounts. It has been that way with every employer we have had. I would probably just have to kiss our old 401k goodbye if the other plan didn't allow rollovers or withdrawals. They were charging so much in fees that we were losing money every month.

I think this answers my question. I've always known that my employer did not allow withdrawals (well not always .. i should say ever since I actually started paying attention to what my 401k actually is. ).. but I thought that was up to the employer when they set up their plan. So when this gentleman told me no plans allow withdrawals I had to double check. I'm wondering if there's a resource online that actually spells this out

[msomnipotent]

So were you just putting money in and then taking it right out as a rollover?

No. We rolled one 401k from one employer into a different one.

[Fishindude77]

It's a RETIREMENT account folks. The money should stay there until you retire. It shouldn't be borrowed. It shouldn't be cashed out early unless some dire catastrophe befalls you. Getting a new car, taking a cruise, paying for college, or remodeling your kitchen don't count as dire catastrophes.

If you take anything out of these responses, take the above.

[disneysteve]

If you take anything out of these responses, take the above.

Yep, though to be fair, rolling the money out of a poor 401k into a better plan or an IRA is certainly not a bad idea if it gets you better investment options and lower costs.

[Thrif-t]

Rollovers are fine, but you can't do those while still employed by the company. That would be nice though.

At my first employer we were allowed to roll over our company match since the funds were matched in company stock. One of the best tips I got from my 1st boss. Our stock was way up, I rolled it out into a Vanguard IRA, and invested in different mutual funds. I think I had around $6K in company stock I rolled out. And I believe that was sometime in the late 90's, that was how I got my start with my vanguard account. I now have over 100k there, and it all started with that 6k rollover.

[disneysteve]

At my first employer we were allowed to roll over our company match since the funds were matched in company stock.

That used to be the norm until they changed the law. Too many people were ending up with far too much invested in the company stock, which was great until the stock crashed, like Enron or IBM.

[Thrif-t]

That used to be the norm until they changed the law. Too many people were ending up with far too much invested in the company stock, which was great until the stock crashed, like Enron or IBM.

Was everyone allowed back then to roll over their match? I was pretty young then so I have no clue if that's how it was or just something my company did?

[disneysteve]

Was everyone allowed back then to roll over their match? I was pretty young then so I have no clue if that's how it was or just something my company did?

I don't recall, but I don't think so. I believe that was part of the problem. People were getting a bunch of money in company stock but couldn't do anything with it.

If the company matches your contribution 50 cents to the dollar, you end up with 1/3 of your account in company stock, even more if the stock does well and outperforms the rest of your portfolio. Company stock shouldn't be more than 5-10% of your portfolio. If the 401k is your main investment, as it is for many workers, you could easily be at 30-40% company stock.

Fortunately, fewer and fewer companies pay the match in stock but there are still many that do.

[Captain Save]

If you take anything out of these responses, take the above.

To that I say ... there are many things that are in between a "dire catastrophe" and "buying a new car"

In my particular case, as I alluded to earlier, like many people, I did not take care of the fundamentals. I got a job out of college and proceeded to take the generic advice of putting money in my 401k. I did not have a plan, I did not establish an emergency fund. If I understood the concept of an emergency fund and why I should h ave one established That would have benefited me a lot more than the "free" money I got. I would not have made the subsequent dumb decisions I had made over the years.

as of right now, I rather invest in my own business than somebody else's. There is a time for that but the IRR on my business will far outweigh anything I get out of the stock market, and would allow me to even put more in the stock market if I want to.

LIquidity is far more important to me than the average person working a 9-5 so I 'm not telling everyone to do the same.

[silvor]

It depends on the plan rules.

I just noticed that my old plan just offered a hardship in service withdrawal through jan 2018 due to Hurricane Irma (if you or a family member are in the designated area). Normally a hardship withdrawal would stop additional contributions for 6 months (which would result in a loss of the match), but they are waiving this rule in this instance.

That is an IRS rule, so it's available for all plans.

As far as getting a hardship withdrawal, or a loan for a house or car or whatever, pretty easy to fake.

[Like2Plan]

That is an IRS rule, so it's available for all plans.

As far as getting a hardship withdrawal, or a loan for a house or car or whatever, pretty easy to fake.

I believe it is plan dependent:

This is the announcement which provides guidance for
Relief for Victims of Hurricane Irma Announcement 2017-13

You will notice that in the background it states:
In order to make a loan or distribution (including a hardship distribution), a plan must contain language authorizing the loan or distribution.

This announcement gives plans leeway to plans. Here is one example:
"For example, regulations under § 401(k) provide safe harbor hardship distribution standards under which a hardship is deemed to exist only for certain enumerated events, and, after receipt of the hardship amount, the employee is prohibited from making contributions for at least 6 months. Plans need not follow these rules with respect to hardship distributions for which relief is provided under this announcement. "

So, I think the announcement provides relief, but a company is not obliged to do so. Perhaps you have another interpretation?

Anyway, you only took a small portion of what I said in regards to plan rules.
Here is the entire quote:

It depends on the plan rules.

I just noticed that my old plan just offered a hardship in service withdrawal through jan 2018 due to Hurricane Irma (if you or a family member are in the designated area). Normally a hardship withdrawal would stop additional contributions for 6 months (which would result in a loss of the match), but they are waiving this rule in this instance.

Some plans allow after tax contributions and in service withdrawals of the after tax funds. (This is how some folks fund their mega back door Roth accounts.) After reaching 59.5, some companies allow in service withdrawals. It just depends on the rules your company has set up.

DH's current company allows anyone to withdraw funds at any time in this order:
1. after-tax contributions (if any)
2. rollovers (if any)
3. employer match after you reach age 55 (only amounts in which you are vested)
Then, if you are over 59.5
4. pre-tax contributions (if any)
5. Roth contributions (if any)
(If you are under 59.5, then you have to meet hardship tests for 4 and 5)

It is a good idea to check the rules of your specific plan.

The reason I give the advice to check the rules of your specific plan is because I have read the rules on several 401k's (DH has 3 and I have 1) and I have been surprised at some of the differences.

[james.hendrickson]

That is an IRS rule, so it's available for all plans.

As far as getting a hardship withdrawal, or a loan for a house or car or whatever, pretty easy to fake.

Silvor - are you saying its okay to fake a hardship withdrawal? If so, that's probably illegal and we can't advocate or permit that here in the forums.

[LivingAlmostLarge]

I don't recall, but I don't think so. I believe that was part of the problem. People were getting a bunch of money in company stock but couldn't do anything with it.

If the company matches your contribution 50 cents to the dollar, you end up with 1/3 of your account in company stock, even more if the stock does well and outperforms the rest of your portfolio. Company stock shouldn't be more than 5-10% of your portfolio. If the 401k is your main investment, as it is for many workers, you could easily be at 30-40% company stock.

Fortunately, fewer and fewer companies pay the match in stock but there are still many that do.

But can't you just sell the company stock and invest it in the market? DH had a company that matched in company stock and he would just sell it and invest it in something else. The vesting was as long as it was in the 401k it had to vest. NOT in the company stock. You are better off just selling it asap and putting it into the total stock market index that's what we did.

[Like2Plan]

I don't recall, but I don't think so. I believe that was part of the problem. People were getting a bunch of money in company stock but couldn't do anything with it.

Yes, that was true for the plan DH was in. I think it was around 2007 that they changed the law that gave employees the ability to chose to invest the match in something else.
But, there is special (more favorable) tax treatment on company stock held in a 401k lhttp://www.investopedia.com/articles.../05/062305.asp
Once you change the 401k company stock to another investment or roll it over to an IRA you lose the special tax treatment. (Just one more thing to consider )