Navigating your retirement savings can be confusing, especially when it comes to withdrawals. This guide provides a step-by-step process for withdrawing from your Empower Retirement 401(k) account, covering different withdrawal options and important tax considerations. Understanding these steps will help you access your money responsibly and minimize potential penalties.
Understanding Your Empower 401(k) Withdrawal Options
Before you begin, it's crucial to understand the various ways you can withdraw from your Empower 401(k). The options available to you depend on your age and the specific circumstances of your withdrawal.
1. Early Withdrawals (Before Age 59 1/2):
Withdrawing from your 401(k) before age 59 1/2 typically incurs a 10% early withdrawal penalty, in addition to ordinary income tax on the withdrawn amount. However, there are exceptions to this rule:
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Hardship Withdrawals: Empower may allow hardship withdrawals in specific situations, such as medical expenses, preventing foreclosure, or paying for tuition. Documentation is required to justify the hardship. Note: Even with a hardship withdrawal, you might still owe income taxes on the withdrawn amount.
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Death or Disability: If you become disabled or die, your beneficiaries may be able to access your 401(k) without penalties.
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Qualified Domestic Relations Order (QDRO): A QDRO allows a portion of your 401(k) to be distributed to a former spouse as part of a divorce settlement.
2. Withdrawals at Age 59 1/2 or Older:
Once you reach age 59 1/2, you can withdraw from your 401(k) without the 10% early withdrawal penalty. However, you will still owe income tax on the withdrawn amount.
3. Required Minimum Distributions (RMDs):
Once you reach age 73 (or 75, depending on your birth year), you're required to take minimum distributions from your 401(k) each year. Failing to do so results in significant penalties. Empower will usually provide guidance on calculating your RMD.
Step-by-Step Guide to Withdrawing from Your Empower 401(k)
The exact process may vary slightly, but generally involves these steps:
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Log in to your Empower Retirement account: Access your account online through the Empower website or mobile app.
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Navigate to the withdrawals section: Look for a section labeled "Withdrawals," "Distributions," or something similar.
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Choose your withdrawal type: Select the type of withdrawal you need (e.g., lump sum, rollover, periodic payments).
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Specify the withdrawal amount: Enter the amount you wish to withdraw. Be mindful of any minimum or maximum withdrawal limits.
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Select your payment method: Choose how you want to receive your money (e.g., direct deposit, check).
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Review and submit your request: Carefully review all the information before submitting your request. Make sure everything is accurate to avoid delays or complications.
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Expect processing time: Allow sufficient time for Empower to process your withdrawal request. The processing time varies depending on the type of withdrawal and the payment method you selected.
Important Tax Considerations
Remember, taxes are your responsibility when withdrawing from your 401(k), regardless of your age (except in the case of certain death or disability distributions). Withholding taxes are usually deducted directly from your payout, but you may need to adjust your withholdings based on your overall tax situation to avoid a large tax bill later. Consult a tax professional for personalized advice.
Planning for Retirement: Beyond the Withdrawal
While knowing how to withdraw is important, planning for when and how much to withdraw is equally critical for a successful retirement. Consider seeking professional financial advice to create a comprehensive retirement plan.
This guide provides general information. Always consult the official Empower Retirement website and materials or contact Empower directly for the most up-to-date and accurate information regarding your specific account and withdrawal options.
