This is a tough question. How old are you? What is your health? And why are you taking the money out?
If you are older than 59 1/2, you can request a distribution form from your plan sponsor or employer. The form will ask whether you want to take a single distribution or a series of systematic payments. If it is not going into a Rollover IRA, the sponsor usually withholds the taxes on your behalf and you would get the net amount paid to you either in a check or an EFT. If you are YOUNGER than 59 1/2, there is a 10% excise tax that is charged (premature withdrawal) by the IRS. So if you can, try and avoid withdrawing funds prior to your retirement and do a LOAN instead. That way you are paying yourself the interest on the loaned portion of the 401K funds, and not a bank.
Depending on your plan, you may also be able to take out what they call "in service" distributions. These allow you to transfer your funds into IRA accounts and diversify your investments for retirement. And thanks to a recent IRS change, you can even move funds from your Retirement and create a guaranteed income stream (provided by the carrier that you purchase the product from) through a Deferred Income Annuity. Think of this like buying a defined benefit with your retirement assets that you can never outlive.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
Count yourself lucky that you have this problem. Less than 20% of workers have a pension plan to consider. You are asking the ultimate question though. Spending down your pension is a major issue as the pressing concern for most retirees is to control their assets so they don’t live longer than the assets can provide. There are specialized representatives who work in this area and you might do well to consult with someone with the RICP® designation.
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If you are older than 59 1/2, you can request a distribution form from your plan sponsor or employer. The form will ask whether you want to take a single distribution or a series of systematic payments. If it is not going into a Rollover IRA, the sponsor usually withholds the taxes on your behalf and you would get the net amount paid to you either in a check or an EFT. If you are YOUNGER than 59 1/2, there is a 10% excise tax that is charged (premature withdrawal) by the IRS. So if you can, try and avoid withdrawing funds prior to your retirement and do a LOAN instead. That way you are paying yourself the interest on the loaned portion of the 401K funds, and not a bank.
Depending on your plan, you may also be able to take out what they call "in service" distributions. These allow you to transfer your funds into IRA accounts and diversify your investments for retirement. And thanks to a recent IRS change, you can even move funds from your Retirement and create a guaranteed income stream (provided by the carrier that you purchase the product from) through a Deferred Income Annuity. Think of this like buying a defined benefit with your retirement assets that you can never outlive.
I hope that this answers your question.