401k Withdrawal Calculator
The 401K retirement fund provides for financial resources after the retirement of an individual. Hence the federal law allows loans as well as hardship withdrawals against the 401K retirement fund. There are many individuals who use the 401K withdrawal calculator available on several websites to calculate the precise amount they can withdraw without having to pay hefty taxes and hefty penalties. However the individual must remember that in case there is a hardship withdrawal made the employer of the individual is not obliged to still contribute to the plan.
Contribution of the employer to the hardship withdrawal calculated using the 401k Withdrawal Calculator is left to the discretion of the employer. Hence there are many employers who will still contribute to the plan while others do not. The hardship withdrawal from the 401K retirement fund is governed by the IRS code. The IRS code specifies that the hardship withdrawals from the 401K retirement fund can be made only if there is an immediate as well as extensive financial need or there are no other financial resources to fund emergency expenses and also if the withdrawal amount does not exceed the required amount.
The IRS code also states that as an individual you cannot contribute to your 401K plan for 6 months in case you have made a withdrawal no matter how precise the amount is by using the 401K withdrawal calculator. There are certain expenses which are allowed for a hardship withdrawal such as unreimbursed medical expenses for you or any of your dependent family members. The hardship withdrawal from your 401K retirement fund can also be used to purchase your principal residence. Similarly a hardship withdrawal can be used to pay the college tuition fees or other educational costs for the next one year for you or any of your dependence.
Despite the provision of hardship withdrawal calculated using the 401k Withdrawal Calculator the federal laws impose heavy penalties as well as heavy taxes on the withdrawal amount. The hardship withdrawals are imposed with income tax if the individual is not the age of 59.5 years or above. Along with the income tax a 10% penalty is also imposed on the hardship withdrawal amount. The federal laws also state that the individual cannot repay the amount into the 401K retirement fund. You must also remember that the hardship withdrawal amounts guidelines are applicable only when you are still servicing your sponsor.
Hence despite several websites providing 401K withdrawal calculators which provide precise calculation and also precise information as to how much you can withdraw to sustain the minimum loss there are many financial experts who still advice against withdrawing from the 401K fund. The financial experts state that you will end up losing a lot of money while paying the penalty charges as well as the income tax on the withdrawal amount. The financial experts also say that you might end up losing more money in case the financially turbulent times become worse. Hence, while using the 401K withdrawal calculator for a hardship withdrawal you must realize the pros and cons before proceeding.
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