It is important for any hard working citizen to understand the benefits that come along with having a 401(k) plan. This plan allows workers to save funds for when they retire through automatic deductions on their payroll. One of the main benefits that comes along with this plan is the fact the money you are investing comes out of your check before income taxes can be deducted. This allows you to save up much more money than you would be able to if you were to put the money in another account after taxes are deducted. But be aware that income taxes will eventually have to be paid, but only upon withdrawal from your 401(k) account.
One option you have with your 401(K) plan is that you can actually withdraw funds from the account in order to pay for other expenses that have occurred. But keep in mind that you will need to be approved for the withdrawal before the funds are received. This withdrawal is actually a loan of 401(k) assets that is also to be repaid through automatic deductions in payroll, exactly how the 401(k) account was funded to begin with. However, these loans do not come free of charge unless certain events have occurred. these events include becoming disabled, unemployed and at least 55 years of age, death of a spouse, big medical bills, etc.
There are also many programs out there that will allow you to take loans from your account for things like education or purchasing a home and paying the loan back with interest over an agreed period of time. You do not have to worry about the interest because it is going to go back right into your account. As long as you maintain your current employment, you typically have a period of five years to repay the loan in full.
In the event of you moving from one job to the next, as long as you have a minimum of one thousand dollars invested you can transfer the money to a new 401(k) with your new employer, or possible even convert it to an IRA account. However, if you choose to you can cash out the funds but you will more than likely be charged heavy fees, penalties, and taxes. So before trying to take out the money, research how much it will cost you in total to do so.
My name is Maurice “Moe” Bedard. I am the founder of America’s #1 Mortgage Forum, LoanSafe.org. My online work has been featured in the New York Times, LA Times, Fox Business, and many other media publications.