AboutWillard R. Brumbaugh, LUTCF Expertise I have answered many questions regarding 401ks, IRAs and annuities as well as life insurance.
I have been counselling against most Qualified Plans since 1994.
Experience Ranked in the top 5 in retirement catagories at Askme.com most of its last 2 1/2 years. Organizations I belong to:
National Association of Insurance and Financial Advisors-California
Inland Empire Estate Planning Council
Education/Credentials Life Underwriters Training Council Fellow
Question I am 62 and my real income has been declining over the past few year due stagnant wages and the annual double digit increase in health care costs. I have depleted my savings and part of my 401k, which has been losing money. I want to take the rest of my 401k money out so that I can afford to pay off my bills and avoid losing my house. I have already taken a hardship disbursement which helped but was not enough. I ask my employers plan administrator that I want to take the rest of my money out. He said that T Rowe would not allow any further disbursements. I called T Rowe and they said that the rule regarding disbursements was written by none other than my plan administrator. And that my plan administrator could amend that rule. I asked my plan administrator if he would amend that disbursement rule that he said that the board of directors had put a cap or something on cash disbursements. Why would the board of directors care about me taking money out of my 401k account to prevent losing my house?
Answer Dear Rich,
I cannot answer the question, since it would require me to read their minds. However, I can guess that they are ignorant of provisions within ERISA and the Internal Revenue Code that permit transfer of 401(k) funds into self-directed IRAs for active employees.
Under age 59 1/2, those transfers are limited to the employers' contributions and funds rolled from previous 401(k)s held in separate accounts. But at your age, if the sponsoring employer allowed it, the entire account could be so moved.
I have a hunch that they fear that if they allowed employees to know that this is possible there would be a mass exodus of funds from their retirement plans. In my opinion that would be good. But this contradicts popular wisdom.
What you need is for the board of directors to become more fearful of a class action suit due to the facts that many employers have already made these transfers available, and requiring employees to keep their money at risk of stock market losses is unreasonable and potentially harmful.
Willard R. Brumbaugh, LUTCF
www.willardbrumbaugh.com
(888) 792-2379
