Today we hear from Harvey in New Jersey who tells us, “I am 67 & semi-retired (working 20 hrs/wk.) I have a 401(k) from my current job where I have been for 4 years. I just went part-time & would like to draw from my 401(k) for supplemental income. I know I can borrow from it & I cannot roll it over as long as I am working, but was told that I could draw from it. My employer says NO. Is this an IRS reg. or company policy situation?”
Dear Harvey,
Looks like you’ve got your act together.
It sounds like a pretty good plan. Only, the drawing thing…?
You can contribute to it.
You can borrow from it.
But, you generally can’t draw from a 401(k) while you’re an active participant. It’s not an IRS or Tax Code rule. It’s a function of the way the plan is drawn up. Once the terms of the plan are set, it’s hard for your employer to change it.
Not all companies have that same policy. For instance, I found KPMG’s policy.
https://www.kpmgcareers.com/culture/benefits_retirement.asp
They say “under certain circumstances you can borrow or draw from the 401(k) Plan while employed with KPMG.”
What’s interesting is the phrase “under certain circumstances”.
Check with your employer’s benefit department or the 401(k) administrator and find out if their plan has any of these “certain circumstances”.
Perhaps if you do a little digging, you will find that there is a loophole for guys over 65 who are still working.
Good luck!
And remember, you can find answers to all kinds of questions about 401(k)s and all kinds of other tax issues, free. Where? Where else? At TaxMama.com
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- U.S. Department of Labor :: 401(k) Plans For Small Businesses
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