AboutJohn D Smith, CFP Expertise I can answer detailed questions regarding mutual fund investing, retirement planning, education planning and related financial planning/investment issues. I have a B.S. degree in Financial Planning & Counseling. I am also a Certified Financial Planner (CFP) and have performed fee only investment management and financial planning services for the past 11 years.
Question Hi. I have been contributing to my companys 401K plan for 3 years. My employer used to do a company match at 100%. This month they decided they could no longer provide any match at all. Well, I am not too happy about this and called to get a total distribution and just cash it out. I was told that I do not qualify for a distribution because I still work for the company but can have a loan. I am already about 85% vested. I am not understanding why I cant cash out my own money. Any clues on this? Thanks so much!
Answer Hi. the rules regarding 401k plans prevent you from taking $$ out and rolling into an IRA while still elegible to participate in the plan. However, you can take a distribution from the plan but will have to pay taxes and penalties on this "early" distribution. You also have the option of borrowing $$ from the plan and repaying yourself with interest, but it does not sound like this is what you want to do. So, bottom line is there are tax benefits associated with participating in a 401k but there are also penalties for withdrawing $$ before retirement. I hope this helps clarify.
