The Impact Of 401K Withdrawals On Your Retirement Income

When you retire, you will be stripped of your regular income, good thing you can prepare today through a 401K retirement savings plan. Because this plan is for use when you retire, administrators of the plan will guard it like a mother hen, which also means that members cannot gain access of their assets easily by opting for 401K withdrawals. Luckily, for those with no other ways to get money, they can still withdraw cash from the plan if they qualify.

You have to know that you will be slapped with penalties if you decide to withdraw your money from the plan too soon, meaning you are not yet in your retirement years. If you opt for 401K withdrawals, it only shows that you will no longer enjoy perks relative to the plan. Ten percent tax will be deducted from the amount that you withdrew if you have not reached fifty-nince and a half years old. Additionally, by choosing 401K withdrawals other things can be sacrificed including the qualification for future investment growth. Also, once you withdraw money from your account, you will find it hard to replace it as there’s an annual limit in the contribution.

However, when you will face money problems that require quick action, you can turn to 401K hardship withdrawal. This type of offering is an option if members cannot apply for a loan from their plan administrators. This type of withdrawal also imposes rules which include the amount that the member can withdraw as it should not exceed the amount that will be utilized for a specific project. You should know that there are few things that this type of withdrawal is authorized by plan administrators and these include if you have unpaid medical expenses and college tuition and if you plan to buy a house. Still, it is subject to the penalty set by the plan.

You cannot abuse your assets in the plan because you will not be allowed to withdraw if you will only use the money for buying things that you love. So, it’s only right that you should reflect on yourself whether 401K withdrawals is needed or not. Evaluating all aspects of your move is needed so that you will live comfortably in the future. So that when it’s time to retire, you can relax and enjoy your time away from the office because you have the money to finance anything that you like to do. You can travel and explore exotic places, take care of your grandchildren, do some gardening in your backyard or attend parties. If you’ve prepared properly, you will no longer worry about what you will do in the future.

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