I am still employed and currently enrolled in a 401k. Can I close this account?

Question

I am still employed, I have been told from my representatives that the IRS will not allow me to close this account completely and take all the monies. They have suggested I apply for a hardship withdrawl but this does not provide the funds I need.

Can they legally hold this money

Answer 1

Withdrawing early will require you to pay penalties that make it not worth withdrawing.  Fees will depend on the company but will be around 20% and will also be taxed as an early withdrawal penalty and as income tax.  You will get about 50% - 60% of what you put in after fees and taxes.  Of course without specific information I'm being general and this is typical.

Answer 2

You can stop contributing but you cannot withdraw the money until you terminate your employment with this company or have another defined circumstance, such as a hardship.  And then you would owe taxes and penalties.

In any case, you can earn a lot of investment income over the long term with a pre-tax investment, so be happy it is not easy to access this money!  You invested it tax-free in a long-term savings account.

Answer 3

From what I am told, you could but you will not get as much money. I know people at work who did, and they got some money back.