Can one tap into 401K temporarily without penalty from the government during a RIF? Just asking for a friend I hope!
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But you must keep that money in the company 401k plan to do that. Do not roll it over to an IRA first or you lose this opportunity.
I was informed by my financial advisor that since I was RIF'd the year I turned 55 I could take any amount out of my 401K one time without penalty, just pay regular income tax on what I withdrew. I waited until this year to withdraw my funds (I was RIF'd in Feb-2016, the year I turned 55). Who knows why that loophole is in the rules/regulations! If Cocoa reads this, you know who I am!
Now this is a good thread. This is what we should be doing on this site. Helping each other through this difficult time.
https://www.irahelp.com/slottreport/age-55-rule-taking-money-out-company-retirement-plan
If you are over 55 you can actually access the 401k of your last job if you're let go without paying the 10% penalty.
for those of you worried about having to borrow funds to make it to your next job you can get a personal line of credit fairly easily from your bank if you have good credit. The trick is you need to establish the line of credit before you are unemployed. (Although there may not be enough time to do it if the RIF happens Thursday). You will typically get a better rate than a credit card (Mine is at prime +4%) if you qualify. I have 35k line with no collateral, it's established on my credit alone. I can take money from the line of credit without any cash advance fees (unlike a credit card). It might be worth calling your bank tomorrow if you are worried, they might be able to get it set up before Thursday. This is a slightly better option if you think you will be living off a credit card when your money runs out.
To be clear, you can rollover 401k funds to a rollover IRA and if you keep it there it's a tax free event. Only if you withdraw funds permanently from an IRA or take a 'loan' from your 401k or IRA and not pay it back it time then you pay the 10% penalty.
Thanks for your replies. I have heard of hardship withdrawal but never investigated it. If figured the government wouldn't give someone a break but I had to ask
You cannot. You will have an option to move that 401k into an IRA account, in that case you have 60 days to deposit money, so you can treat it as a mini loan (60 days loan)... Other than that, you can keep your money but you will have to declare it as income and will have to pay that 10% penalty to the other poster referred to...
http://www.investopedia.com/ask/answers/06/liveoff401k.asp
You will pay a 10% penalty and it's taxable income if you're under 59.5 years old.