What if I need the money before retirement?
- What's an individual 401(k) plan?
- When are individual 401(k)s a good deal?
- Who can contribute to one?
- When can I get access to the money?
- What if I need the money before retirement?
- How should I invest the money?
- How do my withdrawals get taxed in retirement?
- Does an individual 401(k) plan make sense for me?
- Who can help me set up and administer a plan?
In general, the best solution is to take out an individual 401(k) loan, which uses the accumulated balance of the account as collateral. You can borrow up to half of the total balance on your solo 401(k), as long as the loan doesn't exceed $50,000. The remainder of your balance is still invested in your individual 401(k), with tax-deferred investment earnings growth. Loan payment plans vary by provider.
The alternative is to simply withdraw money from your individual 401(k). If you choose to do so before you are at least 59 ½, you'll typically owe a 10% early withdrawal penalty. You'll also owe income tax on the withdrawal - even if you hold a Roth 401(k). There are exceptions, however. The IRS allows the 10% penalty to be waived for certain "hardship withdrawals" such as permanent disability or large out-of-pocket medical expenses.
