Many people are under the impression that they have to have to take money out of their 401k retirement plan. This is just an option. You are not forced, you are not required, and in fact you are encouraged to keep your money in 401k retirement plan until you retire. So on the surface, the answer to the question I see so often of When do I have to take money out of my 401k? is you don’t have to take out your money. There may be a few reasons why you should pull or withdraw money from your 401k, but it is not recommended for everyone. In trying to answer the question, there are some guidelines that need to be further searched and understood before a really clear answer can be made.

You can withdraw money from your 401k retirement in a legal way called hardship withdraws. By certain sanctions you can qualify to make a hardship withdraw. Using you retirement money you can pay for pricey medical bills or funeral bills, a mortgage on your house before foreclosure, tuition for college, certain repairs that are necessary for your home or other financial hardships you are experiencing. Talk with your employers to request a hardship withdrawal. They will either allow you to prove your dire financial predicament or with self-certification experience a penalty of no contributions to your 401k plan for six months after the withdrawal. Asked again, When do I have to take money out of my 401k? Well if you are having financial troubles it may be a good time to take out money, but like stated earlier, you don’t absolutely have to. The choice is yours.

Although making a hardship withdrawal sounds like a good idea, there are some consequences for pulling money out of your 401k retirement. There is a regulation that makes those who withdraw early from their 401k to pay a ten percent extra tax on their money. How does this work? Well when you put money into your 401k, you never pay taxes on that money. When you withdraw that money, even at the time of retirement, you have to pay taxes. You will pay an additional ten percent tax on top of the regular taxes when you pull out money early. When do I have to take money out of my 401k? If you don’t want to pay a penalty don’t take your money out early.

Another angle to the when do I have to take money out of my 401k? is that upon disability the owner would want to definitely to take money out of your 401k retirement plan. This happens to be one of the exceptions to the rules that don’t require you to pay the penalty. You will have to ask your employer about the other exceptions that will allow you withdraw money free o the penalty.

So to answer the question of when do I have to take money out of my 401k?: Well, whenever the situation demands it.