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How to Take Money Out of Empower Retirement: A Comprehensive Guide

So, you’re thinking about accessing your hard-earned savings in your Empower Retirement account. Understandable! Life happens, and sometimes those funds are needed sooner rather than later. The process of withdrawing funds isn’t overly complex, but it’s crucial to navigate it carefully to minimize taxes and penalties and ensure you’re making the best financial decision for your long-term future.

In essence, taking money out of your Empower Retirement account involves initiating a distribution request. This can be done primarily through the Empower website or mobile app, or by submitting physical paperwork. You’ll need to consider your specific plan rules, your age, and the reason for the withdrawal, as these factors significantly impact your options and the potential consequences. Let’s break down the process in detail.

Understanding Your Empower Retirement Plan

Before diving into the “how,” it’s vital to understand your specific plan document. Every plan is different, and the rules governing withdrawals can vary considerably. Access your plan document through your Empower account online or request a copy from Empower’s customer service. This document outlines eligibility requirements, withdrawal options, and any applicable restrictions specific to your employer’s plan.

Steps to Initiate a Withdrawal

Here’s a general roadmap for initiating a withdrawal, but remember, always consult your plan document for specifics:

Log in to Your Empower Account: Access your account either through the Empower Retirement website or the mobile app.
Navigate to “Withdrawals” or “Distributions”: Look for a section specifically dedicated to withdrawals or distributions. The exact wording may vary depending on the website layout.
Choose Your Withdrawal Reason: You’ll be presented with a list of reasons for your withdrawal. Common options include:
- Retirement: This applies if you’re at retirement age (typically 55 or older, depending on your plan).
- Separation from Service: This means you’ve left your employer.
- Financial Hardship: This often requires documentation and is subject to strict IRS rules.
- Qualified Domestic Relations Order (QDRO): A court order related to divorce proceedings.
- Age 59 1/2 or Older: Allows penalty-free withdrawals, regardless of employment status.
- Other: This might include disability or other specific circumstances.
Select the Amount to Withdraw: Specify the dollar amount you wish to withdraw. Be mindful of potential tax implications.
Choose Your Payment Method: You’ll usually have options such as:
- Direct Deposit: Funds are deposited directly into your bank account.
- Check: A physical check is mailed to your address.
- Rollover: Transferring the funds to another qualified retirement account (IRA or another employer’s plan). This can avoid immediate taxes and penalties.
Review and Submit: Carefully review all the information you’ve entered. Once you’re confident it’s accurate, submit your withdrawal request.
Tax Withholding: Empower will automatically withhold a portion of your withdrawal for federal (and potentially state) taxes. You can adjust the withholding percentage, but be aware that under-withholding could result in penalties at tax time.
Confirmation and Processing: You’ll receive a confirmation of your withdrawal request. Allow a few business days for processing.

Potential Penalties and Taxes

This is where careful planning is critical. Withdrawing money from your retirement account before age 59 1/2 generally triggers a 10% early withdrawal penalty, in addition to being taxed as ordinary income. However, certain exceptions exist, such as:

Hardship Withdrawals: These are subject to strict IRS rules and may still be subject to taxes.
Disability: If you’re permanently and totally disabled, you may avoid the penalty.
Qualified Domestic Relations Order (QDRO): Distributions pursuant to a QDRO are generally penalty-free.
Death: If you inherit the account, different rules apply.
Substantially Equal Periodic Payments (SEPP): This allows for penalty-free withdrawals if you take a series of substantially equal payments over your life expectancy.

Taxes: All withdrawals from a traditional 401(k) or similar plan are taxed as ordinary income. Roth 401(k) distributions (of contributions) are generally tax-free and penalty-free if certain conditions are met (such as being age 59 1/2 or older and having the account for at least five years).

The Importance of Professional Advice

Before making any withdrawal, it’s strongly recommended that you consult with a qualified financial advisor and a tax professional. They can help you understand the specific implications of your withdrawal, explore alternative options, and develop a plan to minimize taxes and penalties. A financial advisor can also assist you in assessing the long-term impact of the withdrawal on your retirement savings.

Empower Resources

Empower Retirement offers a variety of resources to help you understand your options:

Website and Mobile App: Provides access to your account information, plan documents, and withdrawal tools.
Customer Service: Empower’s customer service representatives can answer your questions and guide you through the withdrawal process.
Financial Wellness Tools: Empower often provides access to tools and resources to help you manage your finances and plan for retirement.

FAQs About Withdrawing from Empower Retirement

Here are some frequently asked questions to further clarify the withdrawal process:

1. Can I take a loan from my Empower Retirement account instead of a withdrawal?

Yes, many 401(k) plans, including those offered through Empower Retirement, allow you to take out a loan against your account balance. The amount you can borrow is typically limited to 50% of your vested balance or $50,000, whichever is less. Loans must be repaid with interest over a set period, usually no longer than five years (unless the loan is used to purchase a primary residence). If you fail to repay the loan, it will be treated as a distribution, subject to taxes and potential penalties.

2. What is a hardship withdrawal, and how do I qualify?

A hardship withdrawal allows you to access your 401(k) funds due to an immediate and heavy financial need. The IRS defines specific events that qualify as a hardship, such as:

Medical expenses for yourself, your spouse, or your dependents.
Costs related to the purchase of a primary residence (excluding mortgage payments).
Tuition and related educational fees for the next 12 months for yourself, your spouse, your children, or your dependents.
Payments necessary to prevent eviction from or foreclosure on your primary residence.
Burial or funeral expenses for your spouse, children, dependents, or parents.
Certain expenses to repair damage to your primary residence.

You must demonstrate that you have no other reasonably available resources to meet the need. Hardship withdrawals are subject to taxes and may be subject to a 10% early withdrawal penalty if you’re under age 59 1/2.

3. How long does it take to receive my withdrawal from Empower Retirement?

The processing time for withdrawals can vary, but it typically takes 3-10 business days after you submit your request. The exact timeframe depends on your plan’s specific rules and the payment method you choose. Direct deposit is generally faster than receiving a check by mail.

4. What happens to my investments while my withdrawal is being processed?

During the processing period, your investments remain in your account. The value of your account may fluctuate based on market conditions until the withdrawal is finalized.

5. Can I cancel a withdrawal request after submitting it?

It depends. Once you submit a withdrawal request, the ability to cancel it varies depending on your plan’s rules and how far along the withdrawal process is. Contact Empower’s customer service immediately if you need to cancel a withdrawal request. They can advise you on whether cancellation is possible.

6. What is a Required Minimum Distribution (RMD), and how does it affect my Empower Retirement account?

A Required Minimum Distribution (RMD) is the minimum amount you must withdraw from your retirement accounts each year once you reach a certain age (currently 73, increasing to 75 in the future). The amount of your RMD is based on your account balance and your life expectancy. Failing to take your RMD can result in a significant penalty. Empower Retirement will typically notify you when you are required to start taking RMDs.

7. What is a QDRO, and how does it relate to withdrawals?

A Qualified Domestic Relations Order (QDRO) is a court order issued in connection with a divorce that divides retirement benefits between the divorcing parties. If a QDRO is in place, the non-employee spouse may be able to receive a portion of the employee spouse’s Empower Retirement account. Distributions made pursuant to a QDRO are generally penalty-free.

8. What are the tax implications of withdrawing from a Roth 401(k) vs. a Traditional 401(k)?

Withdrawals from a Traditional 401(k) are taxed as ordinary income in retirement. If the withdrawals are made before age 59 1/2, they are also generally subject to a 10% early withdrawal penalty, with some exceptions.

Withdrawals from a Roth 401(k), on the other hand, are generally tax-free and penalty-free if they are considered “qualified.” To be a qualified distribution, the withdrawal must be made at least five years after the first contribution to the Roth account and must be made after age 59 1/2, due to disability, or to a beneficiary after your death.

9. How do I roll over my Empower Retirement account to another retirement account?

Rolling over your retirement account involves transferring your funds from your Empower Retirement account to another qualified retirement account, such as an IRA or another employer’s 401(k) plan. This can be done through a direct rollover, where Empower sends the funds directly to the new account, or an indirect rollover, where Empower sends you a check, and you have 60 days to deposit it into the new account. A direct rollover is generally preferable, as it avoids potential tax issues. To initiate a rollover, contact Empower’s customer service or the administrator of your new retirement account.

10. What happens to my account if I leave my employer?

When you leave your employer, you have several options for your Empower Retirement account:

Leave the money in the plan: If your account balance is above a certain threshold (typically $5,000), you may be able to leave your money in the Empower Retirement plan.
Roll over the money to an IRA: You can roll over your account to a traditional IRA or a Roth IRA, depending on the type of 401(k) you have.
Roll over the money to another employer’s 401(k) plan: If your new employer offers a 401(k) plan, you can roll over your account to that plan.
Take a cash distribution: You can take a cash distribution, but this will be subject to taxes and potential penalties.

11. Can I withdraw just a portion of my account balance?

Yes, you can typically withdraw a portion of your account balance, rather than the entire amount. However, be aware of any minimum withdrawal requirements specified in your plan document.

12. What should I consider before making a withdrawal from my Empower Retirement account?

Before making a withdrawal, carefully consider the following:

Your long-term financial goals: How will the withdrawal impact your retirement savings?
The tax implications: How much will you owe in taxes and penalties?
Alternative sources of funds: Are there other ways to access the money you need?
The impact on your investment portfolio: How will the withdrawal affect your asset allocation?
The advice of a financial advisor: Seek professional guidance to make an informed decision.

Taking money out of your Empower Retirement account is a significant decision with potentially long-lasting financial consequences. By understanding the process, the potential penalties, and your available options, you can make a well-informed choice that aligns with your individual circumstances and financial goals. Remember to consult with a financial advisor and tax professional before taking any action.