Liquidating a 401k

Posted by / 21-Dec-2019 04:51

So, if you need money from your 401k plan, there is no better time than being 59.5 to take a withdrawal if you need it.

Since, according to the IRS, you are standard retirement age, you can take this withdrawal without fear of paying the dreaded 10% early withdrawal penalty.

First off, I need to disclose again that I am neither an accredited financial advisor nor a CPA. While I am sure there are many ways to creatively use your retirement funds, I am sharing with you what I have learned and what seems to me are the most plausible scenarios.

The most optimal way to use your 401k is to either move it into a self-directed IRA/solo 401k or to take a loan out against the funds to help you invest in real estate.

Of course, be careful not to drain your account too soon, or you could be in trouble down the road when you really are retired.

If you don’t need the money, but you do want a little more flexibility within your retirement vehicle, this is a great opportunity for you to roll money over into an IRA.

You will see that at first glance, it may seem to make sense to liquidate the 401k, but be sure to keep reading, as there are better options.

As a disclosure, I am neither a financial advisor nor a CPA.

If your goals are to accumulate maximum net worth, then the self-directed account makes the most sense.Since a 59.5 withdrawal is eligible to be rolled over, you can take all or a portion of your 401k assets (always check first, though) and place them into an IRA even if you are still employed. Always be mindful of the investments you hold in your 401k plan.Just because you can take a good portion of your money out and roll it to an IRA, doesn’t necessarily mean that you should.Meanwhile, the younger folks in pursuit of early financial freedom are skeptical of this advice—and rightfully so.The thought the young folks have is that if you are in your 20s and in pursuit of financial freedom, it is likely you will be financially free well before you hit the age of 60.

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As always, this would be one area that you should consult with a financial advisor about and get their opinion.

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