I made involuntary contributions to a retirement plan while temporarily employed. Can I withdraw these funds without penalty?

By Denise Appleby AAA
A:

Your options depend on the type of penalty that would apply.

If the penalty is a surrender charge or another penalty that would apply to an annuity or insurance product, you may want to consider leaving the assets in the plan until the time when the penalty will no longer apply. These penalties are not usually IRS-assessed penalties; rather, they are assessed by the company offering the product.

If the penalty is the 10% early-distribution penalty assessed by the IRS when an individual makes withdrawals before reaching age 59.5, then you may avoid that penalty by keeping the assets in the plan. If your plan is a 403(b) account, you may transfer the balance to a 403(b) account at another financial institution or roll over the amount to a Traditional IRA. These options are not taxable, and you will not be subject to the 10% penalty.

To learn more about this topic, read Taking Penalty-Free Withdrawals From Your IRA.


This question was answered by Denise Appleby
(Contact Denise)

RELATED FAQS

  1. What are the 403(b) contribution limits?

    Determine whether 403(b) contributions meet federal guidelines. Contribution limits to this retirement plan are determined ...
  2. Can I roll over a 403b plan?

    Learn whether distributions from a 403(b) plan can be rolled over, where they can be rolled over to and what the income tax ...
  3. What is the difference between a 408 (k) plan and a 401 (k) plan?

    Learn key differences between 401(k) and 408(k) plans. Employers provide different options to help employees save for retirement, ...
  4. Is a 408 (k) the same as a Simplified Employee Pension (SEP)?

    Find out the differences and the similarities between a 408(k) retirement plan and a simplified employee pension (SEP), and ...
RELATED TERMS
  1. Variable Annuitization

    An annuity option in which the amount of income payments received ...
  2. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...
  3. Death Master File (DMF)

    Also known as Social Security Death Index. A list of people whose ...
  4. Leveraged Benefits

    The use – by a business owner or professional practitioner – ...
  5. Multibank Holding Company

    A company that owns or controls two or more banks. Mutlibank ...
  6. Short Put

    A type of strategy regarding a put option, which is a contract ...
comments powered by Disqus
Related Articles
  1. 10 Common Retirement Planning Mistakes ...
    Retirement

    10 Common Retirement Planning Mistakes ...

  2. Power Of Attorney: Do You Need One?
    Retirement

    Power Of Attorney: Do You Need One?

  3. The Top Technical Indicators For Options ...
    Options & Futures

    The Top Technical Indicators For Options ...

  4. 7 Steps To Evaluate A Financial Adviser
    Investing Basics

    7 Steps To Evaluate A Financial Adviser

  5. 6 Retirement Planning Tips For Late ...
    Retirement

    6 Retirement Planning Tips For Late ...

Trading Center