- 1). Read your plan rules. Your supervisor or human resources department can provide you with the details of your 401(k) plan. Look up whether your plan allows you to make withdrawals while still employed (in-service withdrawals), loans, and how employee contributions are vested, or transferred to your control over time.
- 2). Contact the IRS, or download IRS Publication 575, "Pension and Annuity Income" (see Resources). Note any exceptions to the early withdrawal penalty for taxpayers of your age.
- 3). Compare borrowing the money from your 401(k) instead of making a withdrawal. Some plans allow you to borrow from your 401(k) without generating a tax bill, and allow you to repay your 401(k) account over a period of up to five years. However, if you lose your job, you will have to quickly pay back the money, or the IRS will deem the loan a withdrawal and levy taxes on the full amount.
- 4). Contact your 401(k) custodian and request a loan or distribution form, as appropriate.
- 5). Choose the amount you plan to withdraw. The more you withdraw, the less opportunity your money will have to compound tax deferred. Also, be aware that your employer must withhold 20 percent of the withdrawal in order to pay income taxes.
- 6). Tell the 401(k) custodian where and how to send you your money. Generally, you can choose to have it delivered by check or have them wire the money directly to your account.
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