How to Take Money Out of 401k Fidelity

If you have a 401k with Fidelity, you can withdraw money in several ways. One option is to take a loan from your account, which must be repaid with interest. Another option is to take a hardship withdrawal, but this may come with tax penalties and fees. If you are over 59.5 years old, you can take penalty-free withdrawals, but you will still have to pay income tax on the amount you withdraw. Finally, if you are retired, you can set up regular withdrawals from your account. Fidelity provides clear instructions and online tools to guide you through the withdrawal process, ensuring that you understand the implications and make an informed decision.

Withdrawal Options for 401k Participants

If you need to access funds from your 401k account, you have several withdrawal options available to you, each with its own advantages and disadvantages. Let’s explore these options:

1. Regular Withdrawals

  • Criteria: Age 59½ or older, or under 59½ with a qualifying event (e.g., disability, hardship)
  • Tax: Taxable as ordinary income plus 10% penalty if under 59½ and not using a qualifying event
  • Pros: Funds are available immediately; access to larger amounts
  • Cons: Tax consequences; potential penalties

2. Roth 401k Withdrawals

  • Criteria: Age 59½ or older, or under 59½ with a qualifying event
  • Tax: Qualified withdrawals are tax-free
  • Pros: No taxes on withdrawals; access to funds without penalty
  • Cons: May not be available in all 401k plans; contribution limits are lower than traditional 401k

3. Loans

  • Criteria: Age 59½ or younger
  • Tax: Repayments not taxable; interest payments are deductible
  • Pros: Access to funds without triggering taxes or penalties; lower interest rates than personal loans
  • Cons: Repayment required, which can impact retirement savings; loan may default if not repaid

4. Hardship Withdrawals

  • Criteria: Significant financial hardship, such as medical expenses, home repairs, or foreclosure
  • Tax: Taxable as ordinary income plus 10% penalty if under 59½
  • Pros: Access to funds for urgent needs; no loan repayment
  • Cons: Must meet specific hardship criteria; still subject to taxes and penalties

5. In-Service Withdrawals

  • Criteria: Participant is still employed and meets specific plan requirements (e.g., hardship or 401k loan offset)
  • Tax: Taxable as ordinary income plus 10% penalty if under 59½
  • Pros: Access to funds while still working; may have fewer restrictions than regular withdrawals
  • Cons: May not be available in all plans; still subject to taxes and penalties

Withdrawal Process:

Withdrawal TypeInstructions
Regular WithdrawalsContact your plan administrator or Fidelity to request a withdrawal; provide required documentation
Roth 401k WithdrawalsSame as Regular Withdrawals
LoansSubmit a loan application to your plan administrator; provide financial documentation; repay loan according to terms
Hardship WithdrawalsProvide proof of hardship to your plan administrator; complete hardship withdrawal form
In-Service WithdrawalsContact your plan administrator to confirm eligibility; review plan requirements; complete withdrawal request

Understanding 401k Penalty Fees

Employees who choose to take a 401k loan will typically have to pay a fee in addition to interest, and must pay back the loan within five years. Any amount left unpaid after five years will be considered a taxable distribution and subject to a 10% early withdrawal tax in addition to income taxes.

Federal Taxes

  • 0% if withdrawn after age 59½
  • 10% additional tax if withdrawn before age 59½

Calculating Your Tax Withholding

Use this tool to calculate federal income tax to be taken out of your distribution.

401k Rollovers and Transfers

If you’re leaving your job or retiring, you may be wondering what to do with your 401k. One option is to roll it over to a traditional IRA or another 401k. This can help you avoid paying taxes and penalties on your retirement savings.

  • Traditional IRA Rollover: This involves moving your 401k funds into a traditional IRA. This is a tax-advantaged account that allows your money to grow tax-deferred until you withdraw it in retirement.
  • Roth IRA Rollover: This option involves moving your 401k funds to a Roth IRA. This is a tax-free account that allows your money to grow tax-free in retirement. However, you’ll pay taxes on the money you contribute now.
  • 401k Rollover: This involves moving your 401k funds to another 401k plan. This is a good option if you’re starting a new job and want to continue saving for retirement.

To initiate a rollover, you’ll need to contact Fidelity and request a distribution. You can then choose to roll over the funds to a traditional IRA, Roth IRA, or another 401k plan.

Here are some important things to keep in mind:

  • You have up to 60 days to complete a rollover.
  • If you withdraw money from your 401k and don’t roll it over within 60 days, you’ll be subject to taxes and penalties.
  • You can only make one rollover per year from a traditional IRA or a Roth IRA.

If you’re not sure which option is right for you, it’s a good idea to talk to a financial advisor.

Additional Resources

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Married –
Head of
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$10,000 – $14,99924%14%26%14%
$15,000 – $19,99928%16%28%16%
$20,000 – $24,99933%18%%30%18%
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$155,000 – $159,99940%40%39%40%
$160,000 – $164,99940%40%39%40%
$165,000 – $169,99940%40%39%40%
$170,000 – $174,99940%40%39%
Fidelity Rollover CenterInformation on how to rollover your 401k with Fidelity.
IRS Rollover FAQsAnswers to common questions about rollovers.

## Early Withdrawal Penalties and Taxes

Early withdrawal from your Fidelity 401(k) may result in penalties and taxes, depending on your circumstances.

Early Withdrawal Penalties

If you withdraw funds from your 401(k) before reaching age 59½, you may face a 10% early withdrawal penalty, in addition to income taxes.

There are exceptions to the early withdrawal penalty, including:

  • Disability
  • Unreimbursed medical expenses
  • Substantially equal periodic payments
  • Roth 401(k) conversion after age 59½

Income Taxes

Withdrawals from a traditional 401(k) are taxed as ordinary income. This means you will pay income taxes on the amount you withdraw, regardless of when you contribute it to your 401(k).

Withdrawals from a Roth 401(k) are tax-free if you meet certain conditions:

  • You are at least 59½
  • You have held the Roth 401(k) account for at least 5 years
  • The withdrawal is from earnings, not contributions
TypeEarly Withdrawal PenaltyIncome Tax
Traditional 401(k)10% (unless exception applies)Yes
Roth 401(k)NoneNo (if conditions are met)

Well, that’s it for our quick guide on how to take money out of your 401k Fidelity account. I hope it was helpful! If you have any other questions or need further assistance, don’t hesitate to reach out to Fidelity directly. And remember, whether you’re saving for retirement or already there, Fidelity is here to support you every step of the way. Thanks for reading, and see you next time!