One of the plans' primary purposes is to provide benefits during retirement. With potential expenses like medical looming when you retire, you want to have enough income to cover those as well as your basic needs. You may be tempted to take money out of your retirement account while you’re still working (known as in-service withdrawals), but you should consider these potential negative impacts:

Taxes

Early withdrawal penalties

Missing out on compound interest

If you must take money out before you retire, consider doing it as a loan, if available. You at least will be paying yourself back and reinvesting in your account. Below are some instances where you may qualify:

  • Hardship or Unforeseeable Emergency Withdrawal: You may be eligible to take a withdrawal if you're facing serious financial hardship, such as, medical or dental expenses, costs related to buying a home, tuition payments, avoiding eviction or foreclosure, funeral costs, major home repairs, or losses from a federally declared disaster. Before requesting a withdrawal, you must first use all other available financial resources. It’s important to provide complete and accurate information, and you may be required to submit documentation to support your request. Keeping accurate records is essential—not only for your own files but also for tax purposes.
  • Age 59 ½ Withdrawal: Once you reach age 59 ½, you can take a withdrawal from any of your accounts for any reason. No supporting documentation is required.

You may wish to obtain the advice of a tax advisor before you request a withdrawal.
Other types of withdrawals:
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Qualified Birth or Adoption Distributions (QBAD) allows you to withdrawal up to $5,000 without penalties within a year of your child's birth or adoption date. Each parent can withdraw up to $5,000 from California state-sponsored plans and will need to be coordinated with your other state-sponsored plans. Keep in mind, these withdrawals might have tax implications.

You have the option to redeposit funds withdrawn for this purpose within three years. See “Repayment Rules for Withdrawals” below for details.

Qualified Domestic Abuse Distributions allows you to withdrawal up to $10,000 without penalty within a year of being a victim of domestic abuse. The maximum withdrawal is $10,000 or 50% of your account balance, whichever is less, across all retirement plans. Keep in mind, these withdrawals might have tax implications.

You have the option to redeposit funds withdrawn for this purpose within three years. See “Repayment Rules for Withdrawals” below for details.

If you are on military leave for 180 days or more, you can take a withdrawal from your pre-tax contribution account with no tax penalty.

Once you take this early withdrawal, you are prohibited from contributing for six months to any 401(k) or 457(b) Plan maintained by the State of California.

If you are on military leave for more than 30 days, you can take a withdrawal from your account.

Once you take this early withdrawal, you are prohibited from contributing for six months to any 401(k) or 457(b) Plan maintained by the State of California.

If you have rolled assets into the plan, you can take a withdrawal from these assets in your rollover contribution account.

If you're a current State of California employee, you can withdraw up to $5,000 from your 457(b) account if your balance is $5,000 or less and you meet certain conditions. These include:

  • No contributions in the past 2 years.
  • No prior distributions under this provision.
  • No account freezes or holds.
  • No active or defaulted loans.

If you and your family have been affected by recent natural disasters or other unforeseeable emergencies, you have options. Certain provisions available through your Savings Plus 457(b) or 401(k) may be available to you and your family during your time of need. Please visit our webpage for more details.
Taxation

Taking money out of your account may have tax consequences. If you're under the age of 59½, you might have to pay a 10% early withdrawal penalty in addition to regular income taxes.

If your withdrawal includes Roth contributions, it can be tax-free if both of the following are true:

  1. At least five years have passed since January 1 of the year you made your first Roth contribution or conversion.
  2. The withdrawal is due to one of the following: you are age 59½ or older, you become disabled, or the withdrawal is made after your death.

If these conditions aren’t met, the earnings portion of your Roth withdrawal may be taxed, and you could also face a 10% penalty. To fully understand how a distribution may affect your taxes, it's always a good idea to consult with a qualified tax advisor
Repayment Rules for Withdrawals

If your withdrawal is eligible for repayment, you have up to three years from the date of distribution to repay the funds.

  • Pre-tax Funds: You can repay the full amount from any qualified plan, into your Savings Plus account, regardless of the original source.
  • Roth Funds: You can only repay up to the amount that was originally withdrawn from the Roth portion of your Savings Plus account only.

It is important to note, any amount you repay is treated as a rollover contribution and does not count toward your annual contribution limit.
For your security, forms used for account management, investments, withdrawals, etc. can be found by logging into your account, and selecting Forms from the Manage Account drop down menu. Don’t have an online account? Create an online account
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Get the help you need

Talk with one of our Personal Retirement Consultants if you have questions about receiving your money in retirement. Neither Nationwide nor its representatives may offer tax or legal advice. You should consult your own counsel before making any decisions about plan withdrawals.

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