Your Comprehensive Guide to Cashing Out Your 401(k) with Lincoln Financial
Are you considering cashing out your 401(k) with Lincoln Financial? Whether it's for an unexpected expense, a new venture, or simply to gain access to your funds, navigating the process can feel overwhelming. But don't worry, you're not alone! Many individuals find themselves in a similar position, and with the right information, you can make an informed decision and execute the process smoothly.
Let's dive in and break down everything you need to know about accessing your Lincoln Financial 401(k) funds.
Step 1: Understand Your Options and the Implications
Before you even think about hitting that "withdraw" button, it's crucial to understand the various ways you can access your 401(k) and, more importantly, the financial implications of each. Cashing out a 401(k) isn't always as simple as getting a check; there are often significant tax consequences and potential penalties.
Sub-heading: Why are you considering a withdrawal?
Financial Hardship: Do you have an immediate and heavy financial need? This could include medical expenses, preventing eviction or foreclosure, or certain educational expenses. Hardship withdrawals have specific IRS rules.
Leaving Employment: If you've recently left your job, you have several options beyond cashing out, such as rolling over your 401(k) to an IRA or your new employer's plan.
Age-Related Withdrawals: If you're 59½ or older, you typically have more flexibility and avoid the early withdrawal penalty.
Other Reasons: Perhaps you need funds for a large purchase or investment. Be aware that these typically come with the most significant penalties if you're under 59½.
Sub-heading: The Cost of Cashing Out Early (Under 59½)
This is perhaps the most important consideration for many individuals. If you are under the age of 59½, cashing out your 401(k) typically incurs:
Ordinary Income Tax: The entire amount withdrawn is generally treated as ordinary income for the year you receive it. This means it will be added to your other income and taxed at your marginal income tax rate. Lincoln Financial is typically required to withhold 20% for federal income tax, but you might owe more or less depending on your tax bracket.
10% Early Withdrawal Penalty: In addition to income tax, the IRS imposes a 10% penalty on early withdrawals from 401(k) plans unless you qualify for an exception. This can significantly reduce the amount you actually receive.
State and Local Taxes: Don't forget that your state and local governments may also levy taxes on your withdrawal.
Think carefully: A $50,000 withdrawal could easily see a significant portion (e.g., 20% federal withholding + 10% penalty + state taxes) vanish before it even reaches your bank account.
Step 2: Access Your Lincoln Financial Online Account
Lincoln Financial has streamlined the withdrawal process through its online portal. This is generally the easiest and most secure way to initiate your request.
Sub-heading: Registering or Logging In
Visit the Lincoln Financial Website: Go to
LincolnFinancial.com/Retirement Log In: If you already have an account, enter your username and password.
Register (If Needed): If you haven't registered for online access, click on "Register" and follow the prompts to create your account. You'll likely need your plan number, Social Security number, and other personal details to verify your identity. It's crucial to register for online access to utilize paperless requests and track your status effectively.
Step 3: Navigate to the Withdrawal Section
Once logged in, you'll need to find the appropriate section for withdrawals.
Sub-heading: Locating Withdrawal Information
Look for "Important Links": On your account dashboard, you should see a section titled "Important links for my plan" or something similar.
Click "Withdrawal information": Within this section, click on "Withdrawal information" or "Withdrawal Request" to begin the process. Note: Only options available to your specific plan will be displayed.
Step 4: Initiate Your Withdrawal Request
Now you're ready to start the actual withdrawal application.
Sub-heading: Reviewing Personal Information and Selecting Withdrawal Type
Review Your Personal Information: Before proceeding, carefully review your personal details, including your marital status. If anything is incorrect, contact your employer or plan administrator immediately to get it updated.
Select the Type of Withdrawal: You'll be presented with a list of withdrawal types. These can include:
In-service withdrawal: If your plan allows withdrawals while you're still employed and meet certain criteria (e.g., age 59½).
Hardship withdrawal: For specific financial needs as defined by the IRS (e.g., medical expenses, down payment on a primary residence, tuition). Be prepared to provide documentation for hardship withdrawals.
Qualified birth or adoption distribution: For expenses related to a new child.
Disaster relief: If you've been affected by a federally declared disaster.
Separation from service: If you've left your employer.
Direct rollover: If you intend to move your funds to another qualified retirement account (like an IRA or a new employer's 401(k)). This is often the most tax-efficient option if you don't need the cash immediately.
Read Messages and Disclosures: The system will likely display important messages and disclosures related to your chosen withdrawal type. Read these carefully as they contain vital information about eligibility, documentation, and potential tax implications.
Click "Continue Request": Once you've selected your withdrawal type and reviewed the disclosures, proceed to the next step.
Step 5: Complete the Required Information and Upload Documentation
This is where you'll provide the specifics of your request.
Sub-heading: Filling Out the Forms
Provide Details: The system will guide you through screens where you need to input information about the amount you wish to withdraw, how you want to receive the funds (e.g., direct deposit, check), and your federal and state tax withholding preferences.
Upload Documents: For certain withdrawal types, particularly hardship withdrawals, you will be required to upload supporting documentation. This could include medical bills, eviction notices, tuition statements, or other relevant paperwork. Ensure your documents are clear and legible to avoid delays.
Save & Continue: As you go through the process, remember to click "Save & Continue" regularly. This allows you to stop a request and come back to it later without losing your progress.
Step 6: Review and Submit Your Request
Once all the information is entered and documents uploaded, it's time for a final review.
Sub-heading: Finalizing Your Submission
Review All Details: Thoroughly review all the information you've entered. Double-check the withdrawal amount, bank details, tax withholding selections, and ensure all required documents have been uploaded. Errors here can lead to significant delays.
Click "Submit": Once you are confident everything is accurate, click the "Submit" button.
Sub-heading: Electronic Authorization
DocuSign Email: Lincoln Financial often uses DocuSign for electronic authorization. You will likely receive an email from DocuSign requesting your electronic signature.
Review and Electronically Sign: Open the email, review the details of your request, and electronically sign the document as instructed. This step is critical for your request to be processed.
Step 7: Track Your Request Status
After submission, you won't be left in the dark. Lincoln Financial provides tools to monitor your request.
Sub-heading: Staying Informed
Online Status Tracking: You can track the status of your request online, usually in the same "Withdrawal information" section where you initiated it.
Email Notifications: Lincoln Financial will typically send you email notifications as your request progresses through different stages (e.g., Initiated, Requested, TPA review/Plan sponsor review/Lincoln review, Approved/Denied).
Be Patient: Processing times can vary depending on the complexity of your request and any required approvals from your employer or plan administrator. If a review isn't completed within 45 days, the request may expire, and you'll need to resubmit.
Sub-heading: Withdrawing a Request
If you change your mind and your request hasn't been approved yet, you may be able to cancel it. Look for a "Withdraw" option on the request status page and confirm your decision.
Step 8: Consider Your Post-Withdrawal Actions
Once you receive your funds, your responsibilities aren't over, especially regarding taxes.
Sub-heading: Tax Implications and Reporting
Form 1099-R: Lincoln Financial will send you a Form 1099-R in the following tax year, reporting your distribution. This form is essential for filing your taxes accurately.
Consult a Tax Professional: It is highly recommended to consult with a qualified tax advisor to understand the full tax implications of your withdrawal and ensure you report it correctly on your income tax return. They can help you navigate any potential penalties or exceptions.
Sub-heading: Reinvesting (If Applicable)
If you cashed out for a specific purpose, ensure the funds are used as intended. If you initially withdrew with the intention of rolling over, ensure the rollover is completed within the IRS-mandated 60-day window to avoid taxes and penalties.
Important Considerations and Tips:
Read Your Plan Document: Your specific 401(k) plan with Lincoln Financial may have unique rules and restrictions beyond the general IRS guidelines. Always refer to your plan's Summary Plan Description (SPD) for detailed information.
Contact Your Employer/Plan Administrator: For any questions specific to your plan's eligibility rules or required documentation, your employer or plan administrator is an excellent resource.
Lincoln Customer Contact Center: If you have questions about the Lincoln Financial platform or general withdrawal procedures, you can contact their customer service. You'll find the appropriate phone number in your online account. The general customer service number is often 877-ASK-LINC (877-275-5462).
Explore Alternatives: Before cashing out, always consider alternatives like a 401(k) loan (if available and you can repay it) or a direct rollover to an IRA, which can help you avoid immediate taxes and penalties while maintaining your retirement savings.
10 Related FAQ Questions:
How to initiate a 401(k) withdrawal with Lincoln Financial online?
You can initiate a withdrawal by logging into your account at
How to find out if I qualify for a hardship withdrawal from my Lincoln Financial 401(k)?
Lincoln Financial's online system will guide you through the eligible hardship reasons (e.g., medical expenses, preventing eviction/foreclosure, tuition). You will also need to provide supporting documentation.
How to avoid the 10% early withdrawal penalty on my Lincoln Financial 401(k)?
Generally, you can avoid the penalty if you are 59½ or older, become totally and permanently disabled, separate from service in or after the year you turn 55 (50 for certain government employees), or qualify for specific IRS exceptions like certain medical expenses or qualified birth/adoption distributions. A direct rollover to another retirement account also avoids the penalty.
How to roll over my Lincoln Financial 401(k) to an IRA?
When initiating a withdrawal request online, select the "direct rollover" option. You will need to provide the details of your receiving IRA account (e.g., institution name, account number).
How to determine the tax implications of cashing out my Lincoln Financial 401(k)?
All pre-tax withdrawals are taxed as ordinary income. If you are under 59½ and don't qualify for an exception, a 10% early withdrawal penalty also applies. Lincoln Financial will typically withhold 20% for federal taxes, but your actual tax liability may be higher or lower. Consult a tax advisor for personalized guidance.
How to track the status of my Lincoln Financial 401(k) withdrawal request?
After submission, you can track the status of your request directly within your online Lincoln Financial account under the "Withdrawal information" section. You'll also receive email notifications.
How to contact Lincoln Financial customer service for 401(k) withdrawals?
You can typically find the appropriate Lincoln Financial customer contact center number in your online account. A general customer service number often listed is 877-ASK-LINC (877-275-5462).
How to get the necessary forms for a Lincoln Financial 401(k) withdrawal?
While the online process is often paperless, if forms are required, they can usually be found on the Lincoln Financial website in their "Forms" section, or by contacting customer service or your plan administrator.
How to know if my employer's specific Lincoln Financial 401(k) plan has unique withdrawal rules?
Always refer to your specific plan's Summary Plan Description (SPD), which outlines all the rules and provisions. You can usually access this document through your online Lincoln Financial account or by contacting your employer's HR department.
How to cancel a submitted 401(k) withdrawal request with Lincoln Financial?
If your request has not yet been approved, you may be able to cancel it by logging into your online account, navigating to the withdrawal request status, and looking for a "Withdraw" or "Cancel" option.
