Ask the Experts: Liquidating Your 401(k)

Q. Can I liquidate the money in my company 401(k), or am I barred from doing so till I’m older? I’m 55.

A. You can, but financial planners say it’s best to avoid acting hastily by cashing out stocks or retirement plans, which could put you at risk if you haven’t saved enough to last you through your retirement years.

Have you considered taking a loan against your 401(k)? If your plan allows that, you’d be able to pay back the loan with interest that gets credited to your account. But if you’re intent on taking money out of your 401(k) before you reach 59½, you’ll face a 10 percent penalty in addition to paying regular income taxes on that money. The rules change if you leave your company. To learn more about early withdrawals, go to www.irs.gov/faqs/faq5-3.html.

Source: John Turner