Cashing out your 401k with Fidelity is straightforward. Log onto the Fidelity NetBenefits website and navigate to the “Accounts” tab. Select your 401k account and click “Withdraw.” Choose the amount you want to withdraw and the destination account for the funds. Review the details carefully and confirm the transaction. The funds will typically be transferred within a few business days. Remember, withdrawing funds from a 401k before retirement age may result in taxes and penalties.
When You Can Withdraw
Before age 59.5, you can only take money out of your 401(k) plan without paying an early withdrawal penalty if you:
- Are disabled.
- Have a medical emergency.
- Need money for college costs.
- Are buying your first home.
- Are called to active-duty military service.
- Are separated from service in the military.
- Have an IRS levy.
- Have certain natural disasters, including federally declared disasters.
- Are terminating employment after age 55 (only funds attributable to pre-age 55 contributions can be withdrawn).
How to Take a Direct Rollover
A direct rollover is a tax-free transfer of funds from your 401(k) plan to an individual retirement account (IRA) or another eligible retirement plan including a 403(b) or 457 plan. To complete a direct rollover, you will need to contact your 401(k) plan provider and the financial institution where you want to open your IRA. They will provide you with the necessary forms and instructions.
There are no limits on the number of direct rollovers you can make each year. However, if you receive a distribution from your 401(k) plan and do not roll it over within 60 days, you will be subject to income tax and a 10% early withdrawal penalty if you are under age 59.5.
Other Withdrawal Options
- Withdraw funds after age 59.5. Once you reach age 59.5, you can withdraw funds from your 401(k) plan without paying an early withdrawal penalty. However, you will still be subject to income tax on the withdrawals.
- Take a loan from your 401(k) plan. You can borrow up to 50% of your vested 401(k) balance, up to a maximum of $50,000. You will need to repay the loan with interest, and if you fail to do so, the loan will be treated as a withdrawal and you will be subject to income tax and an early withdrawal penalty.
Factors to Consider
Before you withdraw funds from your 401(k) plan, it is important to consider the following factors:
- Taxes. Withdrawals from your 401(k) plan are subject to income tax. If you withdraw funds before age 59.5, you will also be subject to a 10% early withdrawal penalty.
- Investment performance. The money you withdraw from your 401(k) plan will no longer be invested in the stock market, so you will miss out on potential investment gains.
- Retirement security. Withdrawing funds from your 401(k) plan can reduce your retirement savings and make it more difficult to retire comfortably.
Table: 401(k) Withdrawal Options
| Option | Age Requirement | Tax Treatment | Penalty |
|---|---|---|---|
| Direct rollover | None | Tax-free | None |
| Withdraw funds after age 59.5 | 59.5 or older | Taxable | None |
| Take a loan | None | Repayment of loan with interest | None (if loan is repaid on time) |
Eligibility and Requirements
Before cashing out your 401(k) Fidelity, you should be aware of the eligibility requirements and potential implications. Here are some key considerations:
- You must have left your employer or reached age 59½ or turned 55 and separated from service.
- You should be aware of the tax implications of withdrawing funds before retirement age.
- You may face a 10% early withdrawal penalty if you are under age 59½.
Partial Withdrawal
Fidelity allows partial withdrawals from your 401(k). This option can be beneficial if you need access to funds but don’t want to cash out the entire account. You can withdraw up to 50% of the vested account balance or $50,000, whichever is less.
To make a partial withdrawal, follow these steps:
- Log in to your Fidelity account.
- Navigate to the “My Accounts” tab.
- Select the 401(k) account you want to withdraw from.
- Click on the “Withdraw” button.
- Enter the amount you want to withdraw.
- Review the withdrawal details and confirm the transaction.
Tax Implications
Withdrawing funds from your 401(k) before retirement age can have tax implications. Here’s what you need to know:
| Withdrawal Age | Tax Implication |
|---|---|
| Under 59½ | 10% early withdrawal penalty, plus income tax on the distributed amount |
| 59½ or older | Income tax on the distributed amount |
Conclusion
Cashing out your 401(k) Fidelity should be considered carefully. Be sure to understand the eligibility requirements, tax implications, and potential penalties before making a decision. If you’re unsure about whether cashing out is the right move for you, it’s advisable to consult with a financial advisor.
Cashing Out a 401(k) from Fidelity
Loan Against 401(k):
- Borrow up to 50% of the vested account balance, with a maximum of $50,000.
- Repayment period is typically 5 years.
- Interest is paid back to the 401(k) account.
Consequences of Withdrawing Early:
- Income tax: Withdrawn funds are taxed as ordinary income.
- 10% early withdrawal penalty: Applies to withdrawals made before age 59½.
- Exceptions: Exceptions exist for certain situations, such as disability or first-time home purchase.
| Withdrawal Method | Consequences |
|---|---|
| Loan against 401(k) | Interest paid back to 401(k) |
| Withdrawal before age 59½ | Income tax + 10% early withdrawal penalty (exceptions apply) |
| Withdrawal after age 59½ | Income tax only |
Steps to Cash Out 401(k) from Fidelity:
- Contact Fidelity and request a withdrawal form.
- Choose the withdrawal method (loan or distribution).
- Specify the amount to be withdrawn.
- Provide tax withholding instructions.
- Sign and submit the form.
Note: Consider seeking professional financial advice before making a withdrawal from a 401(k).
Hardship Withdrawal
A hardship withdrawal allows you to access your 401k funds before retirement if you meet certain criteria. To qualify, you must have:
- Medical expenses that exceed 7.5% of your adjusted gross income
- Costs related to the purchase of a primary residence
- College tuition
- To prevent eviction or foreclosure on your principal residence
li>Funeral expenses
The amount you can withdraw is limited to the amount of your expenses. You must also pay income tax on the withdrawal, and you may have to pay a 10% early withdrawal penalty if you are under age 59½.
Well, there you have it—everything you need to know about cashing out your 401k with Fidelity. The process might seem a bit daunting at first, but once you break it down into smaller steps, it’s not as bad as it seems. If you have any questions or concerns, don’t hesitate to reach out to Fidelity for help. And remember, there’s always the option to roll over your funds to another account if you don’t want to cash them out just yet. Thanks for reading, and be sure to visit us again soon for more 401k tips and tricks!