I have a medical emergency and my 401k from Vanguard won't give me my money until I pay the bill and show them what the health insurance company will pay. They send this information to the IRS for review and then the IRS sends me check minus taxes. Is this legal? It is my money. Why can't I just draw it out and have them take the taxes before they give the money. It sounds insane. I am going to die without treatment. If I had the money to pay them I wouldn't need to dip into my retirement account. This makes no sense. I am 43 years old and have put at least $1000 a month into my 401k and now when I need it to save my life they won't give it to me. I don't have the money upfront. If I did I wouldn't need my retirement. Hello..I am thinking are you people insane. This is my hard earned money now I need it to save my life I still have one minor child at home and need to stay alive for him. Get this they told me if I die all I have to do is provide a copy of the death certificate and they will send me the money for the funeral. Seriously are these people for real. They want me to die because it is cheaper than keeping me alive. It's my money....I could say that a million times. Are there any loopholes I can use to get some of my money to save my life. Everyday I wait I lose my chance of staying alive for me and my family.
Country relating to Question: United States
State (if USA): Minnesota
Talking to Vanguard where my 401k is at. Had extensive conversations with four different people and get the same answer.
Thank you for your question. I will do my best to assist you with your concerns. If you would like me to clarify my answer, I will be happy to do so. I also happen to have been licensed by FINRA/NASD prior law, and am familiar with regulations for investments and 401Ks from both ends of the spectrum.To answer directly, I am afraid it is very legal. The IRS expressly places limitations on withdrawals from 401K plans and other retirement accounts before you turn 59 1/2 or older, since those funds are supposed to be used for retirement, not for emergency use or other potential expenses. The 401K plan has no choice but to send the funds in as authorized because otherwise they would be violating federal regulations. While I agree that this is your hard-earned money, it becomes 'yours' to do with without restrictions only when you are older than 59 1/2. As much as I would love to give you a different answer, the administrator is correct because otherwise the funds do not have to be provided to you.
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Can I roll over half of my retirement into my spouses name? If so can he then put it in the bank so we can draw out the money we need to save my life?
Thank you for your follow-up, Cheryl.A roll-over has to take place from account to account, but it would still be under your name, not your spouse's name. So no, you would have to roll-over into your own account, not under his name. The IRS does permit a 'spousal rollover' which permits the spouse to continue the retirement account as an IRA and keep the assets tax-deferred, but that is permitted only when and if you are deceased, not when you are living. I wish I had better news for you, truly. The only suggestion remaining is to contact the 401K administrator and claim 'medical hardship' as grounds for withdrawal, but that would still have to be approved before the funds are granted, and then you would not have to pay a penalty on the withdrawal. I am assuming that this is what you are attempting to do now.Good luck.Dimitry Esquire41105.9410246528
They will give me medical hardship but I have to upfront the money of $114,000 first then get a copy of what insurance will pay then they send to IRS for review then IRS has Vanguard send me what I need and take taxes out of the the remainder of the 401K. Big problem I don't have $114,000 to do the upfront and insurance companies take forever to say what they are going to pay? What if my husband and I file a Legal Separation tomorrow can we then roll over half of the retirement to him and then he can put the money whereever he want to put it so we can use it to save my live.
Thank you for your follow-up, Cheryl.It has nothing to do with being legally separated, that would not free up the funds. Insurance companies can take time, but if you are pursuing a medical payout, that can pay out within 4 weeks to 3 months of your filing. I do not know how quickly you may need the funds, and while I would love to provide you with a short-cut, you really have to follow their process as they put it in place. This has nothing to do with the administrator any more, it is federal law.Good luck.Dimitry Esquire41105.9542916667
What if we get a divorce then can we roll over half of the retirement into my spouses name as an agreement in the divorce decree and then the spouse could take the money out and put it in the bank after paying taxes and then we could use that money to save my life.
Cheryl,To get a divorce will take you, on average, 6-9 months. While Minnesota does not have a waiting period on divorce, getting a hearing with the judge will take a while, and you would still need to create all the documentation on your end to make it a no-fault process. It will still NOT release the funds, because the administrator can also demand the same review of the funds that you may have to provide to your spouse in the divorce, as they are requesting for the evaluation of your medical condition. Good luck.Dimitry Esquire41105.9681007755
That makes no sense. We just split everything down the middle. I give him 1/2 of retirement he rolls it over. What's the problem?
The problem is that splitting everything down the middle does not necessarily grant your spouse the right to your retirement. The disbursement still has to be approved by the 401K plan administrator. If the whole point is for you to get at the assets, getting divorced will NOT accomplish it. You would still have to file for a formal roll-over, have it be approved (meaning that a court order would have to be provided to the administrator), and there could still be delays. If you want the money eventually, getting divorced will work, but from what it sounds like, this is a critical situation where time is of the essence. Getting divorced will not get you the money faster, it would be easier to apply for the hardship that I suggested in my prior answer.Good luck.Dimitry Esquire41106.0308700231
You keep missing the point. I already filed for medical hardship. I am not going to write what I already wrote three times. Look back at my responses of what they require when I filed the medical hardship. This is not an option for me as I don't have the upfront money of $114,000 to pay for treatment. So unless they are lieing to me about that is there anything else you got for me.
Cheryl,I am not missing the point at all, you asked how you can retrieve your funds from your 401K. You can do so by:1. seeking a medical hardship waiver2. terminating employment, rolling over the funds into an IRA, and then withdrawing funds, also based on a medical hardship.3. Seeking divorce (which will take months), and then rolling over part of your 401K to your then former spouse, and having him withdraw the assets under his name.Beyond that you have to look to your plan rules and regulations as to how disbursements are permitted. The reason I listed termination is because under ERISA the former employer has to release the funds and permit you to take them anywhere else you wish, including other accounts.Good luck.Dimitry Esquire41106.1037079861
I need you to me tell me exactly what happens when I file a medical hardship waiver because I still think based on what you say Vanguard is lying to me. What do I have to supply to Vanguard to get a medical hardship waiver?
Your divorce answer this time was different than last time. Last time you said in the event of a divorce the 401k administer still has to approve me giving him half and then a bunch of other bullshit delays. In your recent divorce answer you said my spouse could roll over the funds and withdraw them under his name. So which is it the first one, the second one, or both.
Also don't forget to answer the question in the first paragraph with full clarity.
Cheryl, First, your initial question asked whether or not what Vanguard is doing is legal. It is. Look to IRC §72(t)(2)(A)(iii) . The rule is that you can exclude from penalty any withdrawal to pay medical expenses that exceed 7.5% of your adjusted gross income. The withdrawal is still subject to regular income tax at your marginal rate. It doesn't matter if you pay the bills first, or withdraw the funds first, but the plan administrator can demand, as per the prospectus and rules in the policy to compel you to pay the bills first. What Vanguard demands is based on the plan rules, something that if you review the law I posted above, will clearly show as the case.Second, my answer pertaining to divorce is not contrary to one another. The administrator would still balk at the withdrawal until and if they are provided with a copy of the divorce order permitting the transfer to take place AND they can still choose not to honor the agreement if such withdrawals are against the plan rules. Since they are not a party to the divorce, they may simply split the accounts into two, but keep both within their system. I am simply guessing here as I have not read your prospectus and I do not know the rules of how to the plan issues their distributions.Good luck and take care. Kindly rate my answers at this time. Thank you.Dimitry Esquire41106.1277638889
JA Mentor, Licensed in PA & NJ, specialize in business/contract disputes, estate creation & admin
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