§401(k) Distributions
Traditional §401(k) Accounts
§401(k) account assets can be withdrawn without penalty after age 59½ if you are eligible for a distribution under your plan.1
Upon withdrawal, ordinary income taxes will apply. Distributions must begin by age 70½ or retirement, whichever occurs later. The first minimum distribution must
be taken by April 1st of the year following the year containing this triggering event.
Roth §401(k) Accounts
Tax-free Roth §401(k) distributions may begin at age 59½ if you are eligible for a distribution under your plan.2
While regular §401(k) account distributions are mandatory at age 70½, Roth §401(k) distributions are not mandatory until the participant’s death if
the account is rolled over to a Roth IRA. This strategy can enable you to create a tax-free financial legacy for your heirs. Your Legend Advisor can assist
you in completing this task.
Funds may be withdrawn upon termination of employment, permanent disability or other conditions detailed in the plan. But keep in mind that you will incur
a premature distribution penalty if you withdraw your traditional §401(k) assets upon separation of service prior to the year you attain age 55 and do not
roll them into an IRA or other qualified retirement plan.3
1Distributions from a traditional retirement account are subject to ordinary income taxes in the year distributed.
Distributions prior to age 59½ may incur an additional 10% penalty.
2In order for the Roth §401(k) account to be distributed tax-free, it must be funded for a minimum of five years and the account
holder must have attained age 59½. A participant would also qualify for tax-free distributions if the account was held for five years and the
account owner became disabled (under the strict definition of disability of §72(p) of the IRS code). Furthermore, in the event of the account
holder’s death, beneficiaries would receive tax-free distributions if the account was held for at least five years. Otherwise, the distribution would
be treated as part return of principal and part taxable earnings. A 10% premature withdrawal penalty may apply to the earnings.
3A participant is exempt from the 10% premature penalty on distributions paid directly to the participant when s/he has
separated from service in the year s/he has attained age 55 or more.
Legend Equities Corporation and its affiliates do not provide tax or legal information or advice.