Want to withdraw 401k for a break...

I need a break from everything and am close to being fired/quitting my job, as it is. I have a loan ($3500) on my 401k, currently, and it doesn't pay off until 2018... I found out that the only way to withdraw it all is if you are no longer employed there, which is likely sooner than later. It was only 9000 last statement, and am wondering should I withdraw it all? Has anyone done this? It's surely not enough for retirement!

Take the break but I would wait until you are sure of your money situation, better safe than sorry.

You might want to talk to an accountant re the tax implications. In Canada, withdrawals from a pension plan are taxed at the top marginal rate even if you don't earn any where near enough to be in that tax bracket. Sure you get a refund once you file your taxes, but that doesn't help you short term.

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Here is what the agent responded with after I inquired:

"lease find to follow the information regarding the reason(s) that a participant can take a Hardship distribution request.

HARDSHIP DISTRIBUTIONS EXPLANATION

A full withdrawal can only be completed by a participant at age 59 ½ or any terminated employees. And then a Hardship distribution is used if the participant has encountered financial hardship and has exhausted all other options. The purposes which are considered Hardship are the following;

1. Foreclosure on principle residence

2. Purchase of principle residence

3. Funeral expense

4. College expense

5. Medical expense

6. Certain expenses for repair of damage to employee’s principle residence

The penalty for this type of distribution is 10% for early withdrawal. Lincoln will automatically withhold this amount and then send a 1099-R tax form to the participant at the end of the year. The penalty and tax amount will then be part of the participants personal tax return and may result in additional tax liability.

In order to receive this type of distribution the participant must provide documentation to support one of these purpose. It is also important to note that the employee/participant must refrain from 401k deferrals for six (6) months after a hardship distribution.

I know this is a lot of information to absorb so feel free to call if you have any further questions."

Be careful with this...I'm no tax professional at all, and take this with a grain of salt, but the "additional tax liability" is where you get hammered. I looked into something like this a few years back and after the tax hits, the amount that I would have been left with was about 10% of what was originally in there. Keep looking; ask a tax professional. If I recall, the penalties are rather steep...

Once you are no longer employed, you can roll it over into an IRA. Then you can withdraw from the IRA, where you pay less penalties for doing so. You can also choose any amount. You can leave some in the IRA. When I was let go, I just opened the rollover IRA with the company that oversaw my 401k (Fidelity). It took about 30 seconds online. Hope this helps a bit and good luck!