Can I Withdraw From My Mercer 401k?
If you’ve found yourself short of cash over the last few years, you’ve probably thought about cashing out your 401k plan. Although these plans are designed for retirement savings, it is possible to make a withdrawal from a 401k, but you may be penalised for doing so.
Investment house Fidelity reported that 2.2 per cent of all their 401k participants had made a withdrawal at some point in 2010, up from 2 per cent in 2009.
A Mercer 401k is one of the most popular 401k plans in the US and so our guide asks the question ‘Can I withdraw from my Mercer 401k?’
The Mercer 401k
Mercer is a name that is known and trusted in the financial sector and they offer a number of plans that can be tailored to fit a company and an employee’s needs.
The 401k plans offered by Mercer generally include the standard 401k benefits and defined employee contributions. Employer matching can be a feature up to a defined percentage, and the maximum amount of contributions allowed by the IRS can be made each year.
Many employers choose Mercer 401k plans because Mercer has a global reputation for retirement investment and for excellent customer service and financial advice.
Can I Withdraw From My Mercer 401k?
It is possible to withdraw from your Mercer 401k plan although you will normally pay a penalty for doing so. This is an additional 10 per cent early distribution penalty tax and you will generally pay it if you have not reached at least age 59 ½ when you take your distribution. This is common to all 401k plans and not unique to a Mercer 401k.
However, in certain circumstances you can make a withdrawal without paying the 10 per cent tax penalty. If you’re under the age of 59 ½ you can take a distribution from your Mercer 401k plan if, for example:
- You become disabled
- You die and the account is paid to your beneficiary
- You make an allowable medical expense deduction
- You terminate your employment and you are over the age of 55
When you withdraw funds from your Mercer 401k you will often find that the withdrawal is taxable. This means that not only do you have to report this as income on your federal income tax return, but you are also subject to an additional 10 per cent penalty.
CNN reports that ‘David Wray, president of the Profit Sharing/401(k) Council of America, said that people making hardship withdrawals could pay a penalty of up to 40 per cent, once state and federal taxes are added to the 10 per cent penalty.’
As well as the penalties for withdrawing from your Mercer 401k, you should also remember that the plan is designed to provide income in your retirement. Withdrawing cash from your 401k plan early means that you are diminishing your retirement fund. And, this is not only by the amount you withdraw but by the amount that money would have grown between now and your retirement.
What if my 401k isn’t a Mercer 401k? Are the rules different?
Sheldon – thank you for your question. The rules for withdrawals from a 401k plan are the same irrespective of the company that administers/runs your scheme.
Can I continue to make payments on a loan from my 401k, after my employment ends?
I filled for FMLA will 401k continue to be deducted from my paycheck
How does it work if you haven’t owned a home in the past 3 years, can you pull it out to use for your home purchase without penalty ?
I have Mercer 401k and want to withdraw my money in yearly installments. However, in their distribution kit it states that insallments are allowed for distribution requested prior to 7/1/2003. So, it looks like you either have to withdraw as a lump sum or rollover to an IRA. Am I right on this?
i have become disable but i have not retired from my job can i make a withdrawb from my 401k?
If over 62 is there a way to avoid
paying taxes on a withdrawal for a child’s college tuition?
I have other 401 K plans. Can I roll them over to my Mercer plan and how do I do it.
I have an existing loan right now. Can I make another loan?
Dex – Most (but not all) 401k providers will let you have more than one loan at a time.
If you have other 401k’s there are many benefits of rolling it to and IRA from the old 401ks. You don’t need to combine it with your current 401k account.