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401(k) Withdrawals

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Written by Aryamaan Lakhotia

Are you eligible?

To cash out a 401(k), you usually need a qualifying event: you have left the employer (separation from service), or you are age 59½ or older. If you are still employed and under 59½, a standard cash-out is not available, but you may be able to use one of these instead:

  • A hardship withdrawal (see 2e)

  • A 401(k) loan (see 2d)

  • If you were recently auto-enrolled, undoing those automatic contributions (an EACA “permissible withdrawal”)

Step by step

  1. Confirm eligibility: We check that a withdrawal is allowed on your account.

  2. Sign your withdrawal form: We email you the 401(k) withdrawal form (Distribution Election Form) through DocuSign. On it, you enter your bank details for a wire or ask for a check. For a full cash-out, check boxes B and B.i on page 2. Enter your actual hire and termination dates (not ‘N/A’).

  3. Your employer signs off: Your plan administrator countersigns the form. We can only start selling your investments after this step.

  4. We sell your investments: If you hold Retirement Mortgage (TRM) interval funds, you also sign an interim liquidity form (see 2f).

  5. We send your money by wire (we do not support ACH) or by check: Make sure your routing number supports wires.

  6. We send you a 1099-R the following tax season.

Taxes: your distribution is generally subject to income tax, and if you are under 59½, an additional 10% early-withdrawal penalty. Please work with a tax professional to get advice on your specific tax situation as this is general information and not tax or financial advice.

How long it takes: if you are invested in the Retirement Mortgage (TRM), expect about 10 to 15 business days to sell your holdings and send the wire (sometimes 3 to 4 weeks for interval funds). After the wire goes out, funds usually arrive in 1 to 3 business days.

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