Status
Not open for further replies.

rose

Extremely helpful member
Joined
Mar 29, 2008
Messages
2,925
Reason
DX MND
Diagnosis
7/2008
Country
US
State
Maryland
City
Anytown
Maybe this is already understood by most here, and I was even more ignorant than I thought. But.... in case this helps someone else:

Shortly after I was told by my neuro not to expect to recover and return to work, I attempted to take out my 401K as a hardship withdrawal. It was a no-go. Did not matter that at that point I had no actual income (short term disability had run out, long term not kicked in, SSDI lost in translation). I could not believe it, but it was true. I did not have a qualifying specific debt to pay, I was not in danger of foreclosure, I did not have a dependent who needed college tuition or board, nor did I have unpaid medical bills, etc etc.

Fast-forward to this past December. We're going over my finances again. Once again, I called my benefits center This benefits person was more helpful. Instead of just saying how the government had strict laws governing the 401 plans, she explained that my problem was that I was on "long term" disability with my company, rather than a status of permanently disabled. If my company had me as permanently disabled, I could withdraw my 401K with no penalties. She gave me the direct phone number to the person in charge of this at my company (who even answered the phone when I called).

Its still not completely worked out. Because of the holidays, and us not having a fax at home, and the scanned documentation I sent via email failed, she only received my documentation last Thursday. I'd also asked her how changing my status from long term disabled, to permanently disabled would affect me as an employee. What if I got better and was able to work again, what would happen then? Would I lose system seniority (in the airline industry seniority is absolutely everything) How would it affect my retirement if I should be around long enough to collect it, what would happen to my gazillion unused vacation flight passes? So, she said she would get me answers to my questions before my status was changed, and that is where I'm at now.
 
Rose, Thank you for the information! I am going to see how that works for a 403 K. We took the little bit that was left in ours after the crash and it would be fabulous if we didn't have to pay taxes to the STINKING govenment. :]
 
I ran the same gamut when over 20 years ago I was forced to go out on long term disability, and eventually 100% disabled. We were forced to live off savings for over a year while I pursued a workers Comp case in Anchorage Alaska, related to my airplane accident while working.
My pilot of our Corporate jet took off behind a 747 and at 8000 ft. got caught in the outflow from the jet and fell over 1000 feet instantly. Our plane only had about an inch of headroom clearance for me, I hit my head and was knocked out. It blew out my vertebra at L4-L5 and they could not operate. That was the end of my career as Safety Director for Exxon on the Valdez oil spill clean up.
I was surprised when my health insurance Cobra went from $200 a month to $2800 a month. That was their way of saying we do not want to insure you because you are sick, hurt, or whatever.
Finally got Medicare after over a year of fighting for it.
I know a lot has changed in 20 years, I hope this works out well for you.
 
I just recently cashed out my pitiful, shrunken 401k. Amounted to a bit over $5k. Certainly helping us get through the lean time before SSDI starts. Had no penalty, but they withheld 20% for fed taxes, and another $500 for state taxes. My status is permanently disabled, with no chances of recovery. My SSDI starts in February, and that payout is a godsend until then. They expedited it, and I had it in 3 days after I applied. Hope you can get yours straightened out and get it.

Perry
 
Perry,

I got my funds (minus the Fed's 20%). No penalty. I'm wondering if next year at tax time I might get some back. If I fall below the 20% tax bracket (and on SSDI I absolutely do) then why would I be taxed at that rate? Guess I'll find out.

As I already had direct deposit set up with my employer, the funds went in electronically after just a couple of days from approval. I'm glad I did it before the market started tanking again!
 
Rose,

Yes, I would have liked to have let mine sit and stew for awhile, it was starting to earn a pretty good percentage again. Oh well. I got mine in November, so I'm gonna take the tax hit from it this year. Hope the 20% federal withholding was enough. Waiting for a W2 from them and the LTD company. I'm sure I'm going to have to pay some tax in future years, on the LTD income probably. Got to talk to a tax pro at some point.

Perry
 
The IRS charges me a penalty for not paying quarterly tax payments on my withdrawal in November. I argued that I had no idea I would become disable in November so how could I have made the quarterly payments. Lawyer said it would cost more to fight their dumb ruling than the penalty. Good ole IRS.
 
We cashed in one of Jim's small IRAs at no penalty. Still not clear how taxes will be effected since it was supposed to be tax free (Roth IRA) and our accountant picked a hell of a time to retire. I decided to wait until after the 1st of Jan so I could deal with that nightmare later.
 
Hi Guys,
I thought I would put my 3 cents in (was 5 cents then the tax man took 2.:cry:)
Your 401K seems similar to our Superanuation plans, you put money in, your company may also contrubute but when you try and take it out before you are normally entitled to, that is when the s**t hits the fan so to speak.

Here we pay app 22% tax on the money if we want to withdraw it before the retirement age. You can access it before hand fairly easy i believe with an ALS diagnosed. according to my advisor(I havent tried though) but the tax you cannot get away from. what a bummer.

Dont know about waiting times i suspect that Super companies dont like giving money back so i would think there would be a month or two.

cheers and see it is all the same every where, they have to get their 2 cents from you.

Peter
 
I liquidated a good chunk of mine to pay for the new bathroom and wheelchair accessible van. I hated to see it go but it was money well spent. My tax guy told me I would pay 25% federal and 5% state.
 
I am on SSDI and LTD through my employer, my LTD sent papers to fill out to keep them updated. Well it seems if I cash my 401k they will use it as earned income and deduct it from my LTD meaning they will not have to pay me for 6 months. I am waiting for clarification from my employer but that does not seem right to me.
 
Evil LTD companies! You can't have any kind of income above and beyond what they have written in their policy. Period! They will deduct it. We learned the hard way.
 
Status
Not open for further replies.
Back
Top