Optimal way for withdrawing vested company match from my 401k?
Why would you want to withdraw only the company match, and presumably leave your personal contributions sitting in your ex-company's 401k plan? Generally, 401k plans have larger annual expenses and provide for poorer investment choices than are available to you if you roll over your 401k investments into an IRA. So, unless you have specific reasons for wanting to continue to leave your money in the 401k plan (e.g. you have access to investments that are not available to nonparticipants and you think those investments are where you want your money to be), roll over part (or all) of your 401k assets into an IRA, and withdraw the rest for personal expenses.  If your personal contributions are in a Roth 401k, roll them over to a Roth IRA, but, as I remember it, company contributions are not part of the Roth 401k and must be rolled over into a Traditional IRA. Perhaps this is why you want to take those in cash to pay for your personal purchase? Also, what is this 30% hit you are talking about? You will owe income tax on the money withdrawn from the 401k (and custodians traditionally withhold 20% and send it to the IRS on your behalf) plus penalty for early withdrawal (which the custodian may also withhold if you ask them), but the tax that you will pay on the money withdrawn will depend on your tax bracket, which may be lower if you are laid off and do not immediately take on a new job. That is, the 30% hit may be on the cash flow, but you may get some of it back as a refund when you file your income tax return. You can borrow against a 401k for 5 years. This defers any penalty fees that the IRS mandates. Put the cash back in your 401k within those 5 years. you can also solo administer 401k plans even if you have an unincorporated business, so you can start one of those if you have any other form of cashflow, and there may be a way to get the other plan rolled into your solo one.  http://www.irs.gov/publications/p560/ch04.html#en_US_publink10009053
Whenever one takes a distribution from an IRA, it cannot be put back into an IRA unless one is doing something like (a) take a distribution from the IRA as a rollover where the owner gets cash in hand to be sent to the new IRA custodian within 60 days, and (b) deposit the money with the new IRA custodian within the prescribed time period. For distributions taken by a first-time home purchaser to buy or rebuild a home, the money can be put back and treated as a rollover up to 120 days after receiving it (Publication 590, page 51, column 2). Note also that distributions taken for  first-time homebuying lose their Qualified Distribution status if not paid to the seller (or bank, for closing costs etc) within 120 days of receipt of the distribution (Publication 590, page 51, column 1). However, one  cannot take a distribution from an IRA, no matter whether the sum comes from contributions, earnings, or previous rollovers, and put the money back into the IRA a few years down the road as having been unnecessarily withdrawn.   What you want to do -- take out some money out of your IRA to buy a house and  put the money back into the IRA later -- is effectively an interest-free loan from your IRA (even if you don't call it a loan or think of it as a loan), and you  are not allowed to do this (except in the special circumstances described above). On the other hand, unless you have a very atypical 401k plan, you can take a loan from your 401k (you will have to pay interest, though) and pay it back over several years. Thus, taking a loan from your 401k might be something you could consider as an alternative to withdrawing money from your IRA. But be aware that there are restrictions on how much you can borrow from your 401k, and usually you cannot withdraw employer match money, even if it has vested. Also, the loan becomes immediately due upon termination of employment, even if the termination was involuntary (i.e. the  employee was laid off or fired). Specifically on the subject of maxing out your 401k, there are several downsides: The employer match usually only applies to the first 6%. Some employers offer no match at all. You listed the match as a pro, but I think it should be pointed out that you can usually get this benefit without maxing out your plan. The investment options are limited. Usually there is at least one fund available from all the common investment classes, but these may not be your preferred funds if you were able to choose for yourself. Fees can be very high. If you are working for a small to medium size company, the fees for each fund will often be higher than for the same funds in a plan offered by a large company. Fees are usually related to the dollar amount of assets under management. Each person has a different tax situation, so if you are single and making 6 figures, you might still be in the 25% bracket even after maxing out your 401k, but the same person filing jointly with a spouse that makes less could get down to the 15% bracket with a smaller contribution. I meet my retirement savings goals without maxing out the 401k. As long as the amount is above the employer match amount, my second priority is to funnel as much money as possible in to my IRA (because I get lower fees and better investment options from Vanguard). "Open an investment account on your own and have them roll the old 401K accounts into either a ROTH or traditional IRA. Do not leave them in old 401k accounts and definitely don't roll them into your new employer's 401K. Why? Well, as great as 401K accounts are, there is one thing that employers rarely mention and the 401K companies actively try to hide:    Most 401K plans are loaded with HUGE fees. You won't see them on your statements, they are often hidden very cleverly with accounting tricks. For example, in several plans I have participated in, the mutual fund symbols may LOOK like the ones you see on the stock tickers, but if you read the fine print they only ""approximate"" the underlying mutual fund they are named for. That is, if you multiply the number of shares by the market price you will arrive at a number higher than the one printed on your statement.  The ""spread"" between those numbers is the fee charged by the 401K management company, and since employees don't pick that company and can't easily fire them, they aren't very competitive unless your company is really large and has a tough negotiator in HR. If you work for a small company, you are probably getting slammed by these fees. Also, they often charge fees for the ""automatic rebalancing"" service they offer to do annually to your account to keep your allocation in line with your current contribution allocations.  I have no idea why it is legal for them not to disclose these fees on the statements, but they don't. I had to do some serious digging to find this out on my own and when I did it was downright scary. In one case they were siphoning off over 3% annually from the account using this standard practice. HOWEVER, that is not to say that you shouldn't participate in these plans, especially if there is an employer match. There are fees with any investment account and the ""free money"" your employer is kicking in almost always offsets these fees. My point here is just that you shouldn't keep the money in the 401K after you leave the company when you have an option to move it to an account with much cheaper fees." Back in the late 80's I had a co-worked do exactly this. In those days you could only do things quarterly: change the percentage, change the investment mix, make a withdrawal.. There were no Roth 401K accounts, but contributions could be pre-tax or post-tax. Long term employees were matched 100% up to 8%, newer employees were only matched 50% up to 8% (resulting in 4% match). Every quarter this employee put in 8%, and then pulled out the previous quarters contribution. The company match continued to grow.  Was it smart? He still ended up with 8% going into the 401K. In those pre-Enron days the law allowed companies to limit the company match to 100% company stock which meant that employees retirement was at risk. Of course by the early 2000's the stock that was purchased for $6 a share was worth $80 a share... Now what about the IRS: Since I make designated Roth contributions from after-tax income, can I make tax-free withdrawals from my designated Roth account at any   time? No, the same restrictions on withdrawals that apply to pre-tax   elective contributions also apply to designated Roth contributions. If   your plan permits distributions from accounts because of hardship, you   may choose to receive a hardship distribution from your designated   Roth account. The hardship distribution will consist of a pro-rata   share of earnings and basis and the earnings portion will be included   in gross income unless you have had the designated Roth account for 5   years and are either disabled or over age 59 ½. Regarding getting just contributions: What happens if I take a distribution from my designated Roth account before the end of the 5-taxable-year period? If you take a distribution from your designated Roth account before   the end of the 5-taxable-year period, it is a nonqualified   distribution. You must include the earnings portion of the   nonqualified distribution in gross income. However, the basis (or   contributions) portion of the nonqualified distribution is not   included in gross income. The basis portion of the distribution is   determined by multiplying the amount of the nonqualified distribution   by the ratio of designated Roth contributions to the total designated   Roth account balance. For example, if a nonqualified distribution of   $5,000 is made from your designated Roth account when the account   consists of $9,400 of designated Roth contributions and $600 of   earnings, the distribution consists of $4,700 of designated Roth   contributions (that are not includible in your gross income) and $300   of earnings (that are includible in your gross income). See Q&As regarding Rollovers of Designated Roth Contributions, for   additional rules for rolling over both qualified and nonqualified   distributions from designated Roth accounts. I think better advice would be always max out your 401K at least to the level that the company provides a match. For example, my company will match 50% up to 10% of your salary. Good luck finding another investment with a guaranteed immediate 50% return. Beyond the company match, it is probably good advice to put as much in the 401K as you can afford if you aren't disciplined enough to invest that money on your own. Otherwise it depends on a number of factors as to whether it is better to invest on your own or in the company plan. I don't think it has to be either-or. You can profitably invest inside the SIMPLE. (Though I wouldn't put in any more than the 1% it takes to get the match.) Let's look at some scenarios. These assume salary of $50k/year so the numbers are easy. You can fill in your own numbers to see the outcome, but the percentages will be the same. Let it sit in cash in the SIMPLE. You put in 1%, your employer matches with 1%. Your account balance is $1,000 (at the end of the year), plus a small amount of interest. Cost to you is $500 from your gross pay. 100% return on your contributions, yay! Likely 0-1% real returns going forward; you'll be lucky to keep up with inflation over the long term. Short term not so bad. Buy shares of index ETFs in the SIMPLE; let's assume the fee works out to 10%. You put in 1%, employer matches 1%. Your contributions are $500, fees are $100, your balance is $900 in ETFs. 80% instant return, and possible 6-7% real long term returns going forward. Buy funds in the SIMPLE; assume the load is 5%, management fee is 1% and you can find something that behaves like an index fund (so it is theoretically comparable to above). 1% from you, 1% from employer. Your contributions are $500, load fees are $50, your balance is $950. 90% instant return, and possible 5-6% real long term returns going forward (assuming the 6-7% real returns of equities are reduced by the 1% management fee). (You didn't list out the fees, and they're probably different for the different fund choices, so fill in your own details and do the math.) Invest outside the SIMPLE in the same ETFs or equivalent no load index funds; let's assume you can do this with no fees. You put in the same 1% of your gross (ignoring any difference that might come from paying FICA) into a self directed traditional IRA. At the end of the year the balance is $500. So deciding whether or not to take the match is a no brainer: take it. Deciding whether you should hold cash, ETFs, or (one of two types of) funds in your SIMPLE is a little trickier. "As long as you're willing to pay the taxes and the penalties, once you're no longer employed you're allowed to do whatever you want. You can always do an ""direct roll-over"" (See IRC Sec. 401(a)(31)(A) which mandates this) and then withdraw from another qualified account, thus creating a withdrawal, if they refuse to just mail you a check (Why would they care? Don't know). The match may have some vesting restrictions, though. Your own contributions - are yours to do with whatever you feel like. That said, just pointing out the obvious - it's a very bad idea. Unless you expect to die before you're 60 and don't want to leave a dime to your heirs, you would probably be better off leaving it in a tax-sheltered account. If the custodian is bad - just roll over elsewhere, there's tons of excellent IRA providers." "You raise a good point about the higher marginal rates for 401K but things will be different, in retirement, than they are for you now.  First off you are going to have a ""boat load"" of money.  Like probably a multi-millionaire.  Also your ability to invest will (probably) increase greater than the maximum allowable to invest.  For this money you might choose to invest in real estate, debt payoff, or non-qualified mutual funds.   So fast forward to retirement time.  You have a few million in your 401K, you own your house and car(s) outright and maybe a couple of rental properties.  For one your expenses are much lower.  You don't have to invest, pay social security taxes, or service debt.  Clothing, gas, dry cleaning are all lower as well.   You will draw some income off of non-qualified plans.  This might include rental real estate, business income, or equity investments.  You can also draw social security income.  For most of us social security will provide sustenance living.  Enough for food, medical, transportation, etc.  Add in some non-qualified income and the fact that you are debt free, or nearly so, and you might not need to draw on your 401K.   Plus if you do need to withdraw you can cherry pick when and what amount you withdraw.  Compare that to now, your employer pays you your salary.  Most of us do not have the ability to defer our compensation.  With a 401K you can! For example lets say you want a new car where you need to withdraw from your 401K to pay for it.   In retirement you can withdraw the full amount and pay cash.  Part of this money will be taxed at the lowest rate, part at higher rates.  (Car price dependent.) In retirement you can take a low interest or free loan and only withdraw enough to make the payments this year.  Presumably this will be at the lowest rate. Now you only have one choice:  Using your top marginal rate to pay for the car.  It doesn't matter if you have a loan or not."