If your 401(k) plan has a provision for "in-service, non-hardship withdrawals," you just might be in luck. Most 401(k) plans allow funds to be withdrawn only at the plan's stated retirement age or when the employee leaves the company.

Many plans allow in-service distributions while the participant is still employed at the company. Such distributions generally require the employee to prove hardship.

Typical examples of eligible hardships include high medical expenses, purchase of a principal residence, educational expenses, or payments necessary to prevent eviction or foreclosure.

Some plans, however, offer non-hardship withdrawal provisions. This means you do not have to prove hardship to take out your money.

How can you find out if your 401(k) plan has a provision for in-service, non-hardship withdrawals? Take a look in the "Summary Plan Description", a document that is required by law to be distributed to employees annually. While most newer 401(k) plans don't offer an in-service, non-hardship provision, the plans at some older, bigger companies may. Most 403(b) plans do offer the non-hardship withdrawal option.

It is important to recognize that money from an in-service, non-hardship withdrawal must be rolled over directly from your 401(k) plan to another retirement plan or IRA in order to avoid penalties and tax withholding.

You should avoid taking receipt of the funds. Your advisor will arrange for a direct transfer to your new custodian. If you want a wider universe of investment choices, the ability to diversify away from company stock, or simply more control over your retirement nest egg, check your 401(k) plan documentation for an in-service, non-hardship withdrawal provision. It might be just what you need to open the door to new retirement planning options.

Note that restrictions do apply. In-service withdrawals generally cannot exceed the participant's vested account balance. Employees making in-service withdrawals may be suspended from making further plan contributions for 12 months, and the amount they may contribute in the following year may be reduced by the amount of their in-service withdrawal. There may be limits on the amounts withdrawn or the number of times withdrawals may be made in a given period.

Clients should consult a qualified tax advisor to ensure distributions from qualified plans are not subject to immediate taxation and the 10 percent penalty tax for withdrawals before age 59 P. Please feel free to call 847/855-4888 or email alfriedlander@yahoo.com if you would like to discuss your situation.

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Alan S. Friedlander owns a financial services practice based in Gurnee. He specializes in investment management and home financing. He can be reached at 847/855-4888 or at: alfriedlander@yahoo.com more information.