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Subject:  Re: 401k distribution fee Date:  2/24/2021  2:03 PM
Author:  aj485 Number:  101447 of 102706

I just got an updated fee schedule for the 401k through my job. It has a $125 participant distribution fee. I asked our HR person what that meant, have not heard back yet. But, is it typical to have a fee like that on any distribution from a 401k?

Well, $125 seems a little steep, but 401(k)s often have distribution fees when closing out an account by taking a total distribution, either to roll the money over to another plan (401(k) or IRA, for instance) or when you take a final distribution of the entire account. I have paid multiple $50 fees to Fidelity over the years to roll money into my Vanguard rollover IRA. If I had rolled the money into a Fidelity IRA, they would have waived those fees - but would have charged me a fee when I moved the money from the Fidelity IRA to the Vanguard IRA. If you are happy with keeping an IRA with the firm that is administering your 401(k), you may be able to avoid this fee even when rolling to an IRA.

If it really is what it sounds like, they charge $125 to give me any of the money back, it seems like I wouldn't want monthly distributions for income in the future (10-15 years out btw).

Good that you are checking with HR, but I suspect that it's not a fee that would be applied to monthly partial distributions. That said, you need to confirm if there are rules on taking out monthly distributions - do they require you to set up a distribution schedule, or can you just take whatever amount you want when you want it.

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