Firstly, to withdraw money from your Empower Retirement 401k, you’ll need to contact the plan administrator or visit their website. You’ll then need to fill out a withdrawal form, providing details such as the amount you wish to withdraw and how you want to receive the funds. Once the form is submitted, it will be processed and the funds will typically be disbursed within a few business days. Keep in mind that withdrawals prior to age 59.5 may be subject to income tax and a 10% penalty. If you have any questions or need further assistance, don’t hesitate to reach out to your plan administrator for guidance.
Planning for an Early Withdrawal
Withdrawing money from your Empower Retirement 401(k) before you reach age 59½ may result in additional taxes and penalties. However, there are a few exceptions to this rule, such as:
- Substantially Equal Periodic Payments (SEPPs): This allows you to withdraw a set amount from your 401(k) each year for at least five years or until you reach age 59½, whichever comes first. The amount you withdraw must be based on your life expectancy and the value of your account.
- Hardship Withdrawal: You may be able to withdraw money from your 401(k) if you have an immediate and financial need, such as medical expenses or a down payment on a home.
- Birth or Adoption: You can withdraw up to $5,000 from your 401(k) within one year of the birth or adoption of a child.
- Qualified Higher Education Expenses: You can withdraw money from your 401(k) to pay for qualified higher education expenses for yourself, your spouse, or your children.
If you do not qualify for one of these exceptions, withdrawing money from your 401(k) before age 59½ will result in a 10% early withdrawal penalty, as well as ordinary income taxes on the amount withdrawn.
| Withdrawl Reason | Penalty | Taxes |
|---|---|---|
| Substantially Equal Periodic Payments (SEPPs) | None (if payments meet certain requirements) | Ordinary income taxes |
| Hardship Withdrawal | 10% | Ordinary income taxes |
| Birth or Adoption | None | Ordinary income taxes |
| Qualified Higher Education Expenses | None | Ordinary income taxes |
| Other Withdrawals | 10% | Ordinary income taxes |
Withdrawal Options
Empower Retirement offers several withdrawal options for your 401(k) account:
* Withdrawals: You can withdraw up to the allowable IRS limit each year. The limit varies depending on your age and other factors.
* Partial distributions: You can take out less than the annual limit.
* Periodic payments: You can set up regular withdrawals over a period of time.
* Lump-sum distribution: You can withdraw your entire account balance in one transaction.
Fees
Empower Retirement charges the following fees for withdrawals:
* Withdrawal fee: $10 per withdrawal
* Early withdrawal fee: 10% for withdrawals taken before age 59½
| Withdrawal Type | Withdrawal Fee |
|---|---|
| Regular withdrawals | $10 |
| Partial distributions | $10 |
| Periodic payments | $10 per withdrawal |
| Lump-sum distribution | $10 |
Tax Implications of Distributions
Understanding the tax implications of withdrawing money from your Empower Retirement 401k is crucial. Here’s a breakdown of the tax treatment depending on your distribution type:
Qualified Distributions
*
- Taxed as ordinary income at your current tax bracket
- Eligible for the 10% early withdrawal penalty if taken before age 59½
Non-Qualified Distributions
*
- Taxed as ordinary income plus 10% early withdrawal penalty if taken before age 59½
- Subject to additional taxes on earnings
Exceptions to the Early Withdrawal Penalty
*
- Substantially equal periodic payments
- Medical expenses exceeding 7.5% of your adjusted gross income
- Disability
- Health insurance premiums while unemployed
- Qualified higher education expenses
- First-time home purchase (up to $10,000)
| Distribution Type | Tax on Contributions | Tax on Earnings | Early Withdrawal Penalty |
|---|---|---|---|
| Qualified | 0% | Ordinary income | 10% if taken before age 59½ |
| Non-Qualified | 0% | Ordinary income + additional taxes | 10% + additional taxes on earnings if taken before age 59½ |
It’s important to consult with a tax professional or financial advisor to determine the tax implications specific to your situation before making any withdrawals.
Required Minimum Distributions
Once you reach the age of 72 (or 73 if you turn 73 in 2023 or later), you must take Required Minimum Distributions (RMDs) from your Empower Retirement 401k each year.
The amount of your RMD will depend on your account balance and your age. You can calculate your RMD using the following formula:
- RMD = Account balance ÷ Life expectancy factor
The IRS provides life expectancy factors for different ages on its website.
You can take your RMD in a variety of ways, including:
- As a lump sum
- In monthly installments
- In a series of equal payments over your life expectancy
If you fail to take your RMD by the deadline, you will be subject to a 50% penalty on the amount you should have withdrawn.
| Age | Life Expectancy Factor | RMD (for an account balance of $100,000) |
|---|---|---|
| 72 | 27.4 | $3,649.63 |
| 73 | 26.5 | $3,773.59 |
| 74 | 25.6 | $3,906.25 |
Well, there you have it, folks! Withdrawing money from your Empower Retirement 401k can be a straightforward process, but it’s always a good idea to plan ahead and consider the potential tax implications. Remember, retirement savings are meant for your golden years, so don’t rush into any decisions. If you have any more questions or need further clarification, don’t hesitate to reach out to Empower Retirement’s customer service. And hey, thanks for reading! Be sure to check back later for more money-saving tips and tricks that can help you plan for a brighter financial future.