The method and process of withdrawing money from your 401(k) will depend on your employer and the type of withdrawal you choose. Withdrawing money early from your 401(k) can carry serious financial penalties, so the decision should not be made lightly and should be a last resort option.

Not every employer allows 401(k) withdrawals, so the first thing you need to do is check with your employer's human resource department to see if the option is available. If it is, then you should check the fine print of your 401(k) plan to determine the type of withdrawals that are allowed.

As of 2017, if you are under the age of 59.5, a withdrawal from a 401(k) is subject to a 10% early withdrawal penalty. You will also be required to pay normal income taxes on the withdrawn funds. For a $10,000 withdraw, once all taxes and penalties are paid you will only receive approximately $6,300. This should be considered before taking money from your retirement fund. You might also be eligible for a 401(k) loan. Instead of losing that portion of your investment account forever as you would with a withdrawal, a loan allows you to replace the money through payments deducted from your check. This option is not always available, so you will need to ask about the loan option.

There are some withdrawals that can be taken without a penalty. For example, withdrawing money for an economic hardship, to pay college tuition or to fund a down payment for a first home are all withdrawals that are not subject to early withdraw penalties, but you will have to pay regular income taxes on the money. In some cases, if you left your employer in or after the year in which you turned 55, you may not be subject to the 10% early withdrawal penalty.

Once you have determined your eligibility and the type of withdrawal, you will need to fill out the necessary paperwork and provide the requested documents for the withdraw. The paperwork and documents will vary depending on your employer and the reason for the withdrawal, but once all the paperwork has been submitted you will receive a check for the requested funds.

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