The Drawback to In-Service Withdrawals
Of course, nothing comes without disadvantages. An in-service withdrawal is no exception. So, what are some downsides to potentially opting for a 401(k) non-hardship, in-service withdrawal? Technically, IRAs don’t let you take out loans. On the other hand, you can take out a loan from your 401(k). Taking a 401(k) loan isn’t a decision that should be made in haste, though. With that said, you can use your IRA funds for certain purposes.
As mentioned previously, withdrawals may be subject to taxation if they don’t meet the 60-day rollover deadline. The amount paid in taxes would reduce the balance that is withdrawn. In other words, you wouldn’t have the whole amount withdrawn to work with.
Another possibility? When you withdraw funds, you might pay an “opportunity cost.” That could be a missed opportunity of having that balance potentially growing with any investment growth in the 401(k) portfolio.
Need Help Exploring Your Options?
For 401(k) plan participants who want to be able to withdraw their money from their company-sponsored plan while they are still working there, in-service withdrawals offer a potential solution to filling that need. Of course, an in-service withdrawal is only a means to an end. And it should be carefully considered before you commit to one.
Thanks for a great year, let’s make 2022 just as awesome.
1st Capital is available to help you review your options and empower your decision making with this very important financial tool. Contact me at 312-243-3907/Office * 312-952-8040/Cell * [email protected] * www.1stcig.com