www.youtube.com/watch?v=Oq8z6JffTC8

Right now I have been getting a lot of questions from people asking, “When can I start taking money out of my 401k?” I think a lot of it has to do with the current state of the economy and people are just trying to find more ways to get more income and more money that they need to survive.

What I think most people want to know is, how do I take that money out and avoid that 10% penalty? And it’s a little bit complicated, but let me kind of give you the basic guidelines. You’re not allowed to take money out of your 401k and avoid the IRS penalty before age 59½. Now, one of the caveats to that is if your company’s 401k allows it, and you’re 55 years of age or older and you retire from your company, and you leave the 401k there at that company, then you can start pulling money out of your 401k without dealing with any IRS penalties.

Now that’s something that you’re going to have to find out from your HR Department, if they actually allow that in their 401k plan. Now what most people do when they leave a company is they take the money out of their 401k and wisely put it into their own individual retirement account or IRA. If you do that, then you will definitely have to wait until you’re 59½ before you start taking that money out. Because if you take that money out prior to that, even if you retire from your company, you’re going to get hit with that penalty. That special provision that allows you to start taking money at age 55 or older is only if you retire from the company and you leave your money in that company’s 401k plan.

So now the next thing that happens is someone will ask,”Well what if my company has closed its doors? What about then? Can I start taking my money?” Unfortunately, if your company has closed its doors, then your 401k has either already been transferred to an IRA or it’s been sent to you and you’ve got to make sure you transfer that money to an IRA or you’re going to get a tax penalty on all of those funds that have been sent to you.

So that’s just some information to keep in mind there.