Q: Can I withdraw from my 401k or must I take a loan?
I am 100% owner of my 1120-S corporation and am 71 years of age. My 401K is company sponsored.
A: You can withdraw from your 401k anytime, in fact, you should have an amount that is required to be distributed from the plan once you have reached 70 1/2. The distribution will be taxable to you upon distribution, but once you’re of age it will not be a early distribution and therefore won’t be penalized. If you were trying to take money from the plan that is not taxable, it would have to be from a loan or Roth. You are allowed to lend up to 50% of the vested balance of the funds or $50,000, whichever is less. Just make sure the loan goes to you the participant and not the entity. If it goes to the entity sponsoring the plan, this will be a prohibited transaction.
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