Voluntary Plan Termination

A voluntary plan termination (VPT) is when an employee leaves their job and takes their retirement savings with them. This is different from a 401(k) hardship withdrawal, which is when an employee takes money out of their 401(k) plan for a specific reason, such as medical expenses or buying a home.

There are a few things to keep in mind if you're considering a VPT. First, you'll need to make sure that you're eligible. Generally, you need to have been with your employer for at least five years and have reached age 55. You'll also need to have a balance in your 401(k) plan of at least $5,000.

Once you're eligible, you'll need to decide how you want to take your money. You can either roll it over into an IRA or another qualified plan, or you can take it as a lump sum. If you take it as a lump sum, you'll have to pay income taxes on it, and you may also have to pay an early withdrawal penalty.

There are some advantages to a VPT. You'll have more control over your money, and you can use it for anything you want. You may also be able to avoid the 10% early withdrawal penalty if you're over 55.

However, there are also some disadvantages to a VPT. You may not get as good of an interest rate on your money in an IRA or another qualified plan. You may also have to pay income taxes on your money, and you may have to pay an early withdrawal penalty if you're under 55.

Before you decide whether to make a VPT, you should talk to a financial advisor to weigh the pros and cons.