1. 3998 POINTS
    Matt Benore
    Founder, DenverWest Insurance Professionals, Inc.,
    The only way you can take money out of your 401(k) is to take a loan. A withdrawal will be reported to the IRS and will be considered income. As long as your 401(k) is not closed, you should not be taxed. Be aware however you may be required to repay the loan back with monies taken out of your paycheck.
    Answered on October 8, 2014
  2. 37376 POINTS
    David G. Pipes, CLU®, RICP®
    Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
    The whole idea of a 401(k) is that you defer taxation on the deposit and the earnings of the 401(k) until a later date. The assumption is that you will be avoiding a high tax now for a low tax later. The irony is that is not always the case. The IRS will not only tax your 401(k) but they will force you to take withdrawals at a predetermined rate after you reach seventy and a half years of age, unless you are still working.

    While you cannot avoid paying the tax, there are schemes that would allow you to take the Required Minimum Distributions (RMD) each year and hopefully preserve the money in the fund. However, when you die, your beneficiaries will have the privilege of paying the taxes on the money.
    Answered on March 11, 2015
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