Withdrawing from your Fidelity 401k can be done through a few simple steps. Firstly, log into your Fidelity account and navigate to the “Retirement” tab. Select “Withdrawals” from the menu and choose the account you want to withdraw from. Determine the amount you wish to withdraw and the type of withdrawal you prefer, such as a lump sum or periodic payments. Review the details carefully, including any applicable tax implications, and confirm the withdrawal request by following the on-screen instructions. Fidelity will process your request and you should receive the funds within a specified timeframe.
Withdrawing from a Fidelity 401k
Withdrawing money from a Fidelity 401(k) account is a decision that should be carefully considered, as it can have significant financial implications.
Early Withdrawal Penalties
If you withdraw money from your 401(k) before reaching age 59½, you may be subject to a 10% early withdrawal penalty. This penalty is in addition to any income tax you may owe on the withdrawal.
There are some exceptions to the early withdrawal penalty, including:
- Substantially equal periodic payments
- Medical expenses
- Disability
- Qualified higher education expenses
- First-time home purchase
If you do not qualify for an exception, you will have to pay the 10% early withdrawal penalty. This penalty is calculated on the amount of the withdrawal, not on the amount of the gain.
Types of Withdrawals
There are two types of withdrawals you can make from your 401(k):
- Regular withdrawals are taken from your account on a regular schedule, such as monthly or annually.
- Lump-sum withdrawals are taken all at once.
Regular withdrawals are generally subject to a 10% early withdrawal penalty if you are under age 59½. Lump-sum withdrawals are subject to the same 10% penalty, but you may also be able to avoid the penalty if you meet one of the exceptions listed above.
Withdrawal Process
To withdraw money from your Fidelity 401(k), you will need to contact Fidelity and complete a withdrawal form.
The withdrawal form will ask for the following information:
- The amount you want to withdraw
- The type of withdrawal (regular or lump-sum)
- The date you want the withdrawal to be processed
Once you have completed the withdrawal form, you will need to mail it to Fidelity.
Withdrawal Timeframe
The time it takes to withdraw money from your Fidelity 401(k) will vary depending on the type of withdrawal you are making.
Regular withdrawals are typically processed within a few days.
Lump-sum withdrawals may take longer to process, especially if you are under age 59½ and do not qualify for an exception to the early withdrawal penalty.
Tax Implications
Withdrawals from a Fidelity 401(k) are subject to income tax.
The amount of tax you owe will depend on the amount of the withdrawal and your tax bracket.
If you are under age 59½ and do not qualify for an exception to the early withdrawal penalty, you will also have to pay a 10% penalty.
| Type of Withdrawal | Tax Implications |
|---|---|
| Regular withdrawals | Subject to income tax |
| Lump-sum withdrawals | Subject to income tax and may be subject to a 10% early withdrawal penalty |
Required Minimum Distributions
Once you reach age 59½, you must start taking Required Minimum Distributions (RMDs) from your 401(k) account.
The amount of your RMD will be based on your age and your account balance. Here’s how you can calculate your RMD:
- Divide your account balance by the Distribution Period. The Distribution Period is your life expectancy, which is based on your age as of your birthday in the calendar year that you turn 72. Use the IRS life expectancy table to find your Distribution Period.
- The IRS provides a worksheet to help you calculate your RMD.
Investment Options After Withdrawal
After withdrawing funds from your Fidelity 401k, several investment options are available to you. Consider your financial goals, risk tolerance, and time horizon when making your decisions.
- Certificates of Deposit (CDs): CDs offer fixed interest rates and terms, providing a predictable return on your investment.
- Money Market Accounts (MMAs): MMAs are similar to CDs but offer more liquidity and typically lower interest rates.
- Mutual Funds: Mutual funds pool investments from many individuals, providing diversification and professional management.
- Exchange-Traded Funds (ETFs): ETFs are similar to mutual funds, but they trade on exchanges like stocks, offering more flexibility and potentially lower costs.
- Annuities: Annuities provide guaranteed income for a specific period or for the rest of your life.
It’s essential to consult with a financial advisor to determine the most appropriate investment options for your individual circumstances.
Taxes and Penalties
Withdrawals from a 401k are subject to taxes and possible penalties if taken before age 59½. The amount withheld depends on your age, the withdrawal amount, and any applicable exceptions or rollovers.
| Withdrawal Age | Taxes and Penalties |
|---|---|
| Under 59½ | 20% federal income tax withholding + 10% early withdrawal penalty |
| 59½ or older | 20% federal income tax withholding (no penalty) |
Tax Implications of Withdrawing from a Fidelity 401(k)
Withdrawing funds from a Fidelity 401(k) account before reaching age 59½ can trigger tax penalties and income taxes. Here’s an overview of the potential tax implications:
Tax Penalties
- 10% early withdrawal penalty: Applies to withdrawals taken before age 59½, unless certain exceptions apply, such as disability or qualified first-time home purchases.
- Additional 5% penalty for health savings account (HSA) withdrawals: Applies to individuals under age 65 who withdraw funds from an HSA for non-qualified medical expenses.
Income Taxes
- Ordinary income tax: Withdrawals are taxed as ordinary income based on your current tax bracket.
- Tax on earnings: Only the portion of your withdrawal that represents earnings is subject to income tax. Contributions and any growth from these contributions are not taxed.
| Withdrawal Type | Tax Penalty | Income Tax |
|---|---|---|
| Roth Contributions | No | No |
| Roth Earnings | No | Yes |
| Traditional Contributions | 10% (unless exception applies) | Yes |
| Traditional Earnings | 10% (unless exception applies) | Yes |
| HSA Contributions | No | 5% penalty (applies to non-medical expenses) |
| HSA Earnings | No | 5% penalty + income tax (applies to non-medical expenses) |
Welp, that’s about all she wrote, folks! With these steps, you’re all set to say bye-bye to your Fidelity 401k and welcome your hard-earned cash home. Remember, withdrawing money from a retirement account can come with tax implications, so be sure to consult with a tax professional before making any major moves. Thanks for hanging out and giving this article a spin. If you still have any burning 401k questions, come on back and give us a visit later. We’ve got more financial wisdom waiting for you!