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Can I make monthly withdrawals from my 401(k) account due to financial hardship?

I am 56 years old and currently unemployed and may soon need to consider a hardship withdrawal from my 401(k) account. I anticipate that I'll need a partial sum to pay off outstanding loans and credit card debts totaling approximately $50,000. Can I then make monthly withdrawals from the balance in order to cover monthly expenses if needed?

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August 2018

There are a couple options the regulations may remove any penalty:

Regulation 72t allows someone make withdrawals from their 401k without a penalty.  There are rules that need to be followed including: you must have payments made to you over a term of not less than 5 years or until age 59 ½ (whichever is longer). See IRS Pub 590

There is a second exception:  If your funds are still at the company 401k where you were employed (not permitted for IRAs) and you left the company during or after the year in which you turned age 55, there is not penalty placed on the withdrawals.  See IRS Pub 575

The 72t requires payment for a specified period of time, whereby, the 'rule of 55' seems to have more flexibility.

One last comment.  When you buy a car, and find what you want at price and terms that satisfy you, does it matter how the person that sells you the car gets paid – salary or commission?  Of course it doesn't, so why should it matter when getting a financial solution.  Fee only advisors do NOT offer you a full spectrum of solutions.  Employ the adage – caveat emptor – buyer beware.  When challenged they will inform you that by not getting paid commission, they are looking out for your best interest.  Here's what is not said, being paid a commission can be tempting, I may not be able to resist that temptation, so I don't do business that requires me to control myself.  What other temptations are they not telling you about?

Investment advisory services offered through Virtue Capital Management, LLC (VCM), a SEC registered investment advisor.  VCM and Charlotte Wealth Group are independent of one another.

July 2018
July 2018
July 2018