Can I withdraw my money anytime I want?

  1. No. You can generally get access to your account balance upon certain “distributable events”:
    1. Termination of employment
    2. Death
    3. Disability
  2. Money in your retirement account should be used for what it is intended: your retirement.

If I have a financial hardship, can I get a distribution?

  1. Only if the plan allows for hardship distributions—and not all plans do.
  2. You must give proof of your financial hardship.
  3. If the plan has a loan provision, you may be required to take a loan rather than a hardship distribution.

What does the IRS consider a “financial hardship”?

  1. Funds to avoid foreclosure or eviction
  2. Medical expenses not covered by insurance
  3. Funeral expenses
  4. Home purchase
  5. Post-secondary education expenses

How much will I pay in taxes when I receive a distribution of my money?

  1. Unless Roth in character, your distribution will be taxed at your current tax bracket—given all the other income you have received—in the year of the distribution.
  2. Earnings on your Roth account balance are tax-free when withdrawn providing the distribution is a “qualified distribution.”
    1. A distribution to be “qualified”, two conditions must be met:
      1. You are over the age of 59 ½;
      2. The Roth account has existed for 5 years.
    2. Distribution of Roth contributions are always tax-free. The question is whether the earnings on the Roth balances are taxable or not.

Is there a tax penalty to withdraw my money?

  1. NO, if:
    1. In all situations, the distribution occurs after age 59 ½.
    2. You have terminated employment in the year in which you are age 55 or older.
      1. This exception applies only to the distribution of account balances of plans in which termination of employment occurs at age 55 or older.
    3. You take your distribution as a series of “equally periodic distributions” for a period not less than 5 years AND through to your age 59 ½ or older.
  2. YES, in all other circumstances.