My company recently started offering 401k retirement plan. They do not match any contributions. I was advised to cancel my 401k with them and open a retirement account at my bank. My company told me I could not get the money unless I quit or was terminated or unless I was 59- 1/2 years old.
Yes, they are correct. Once you have made contributions to the plan, you are subject to the plan terms and legal restrictions regarding distributions. You can cease further contributions, but those that have already been contributed cannot be distributed while you are employed, if you are under age 59 1/2, without a demonstration of hardship, and the terms of hardship are usually fairly stringent, issues such as medical expenses, prevention of eviction or foreclosure from your home, etc.
Your company is correct. The company does not have to offer contribution matches. The money you contributed to the plan will be held in your account until you leave employment with this employer, at which time you can transfer those funds to another retirement account. If you leave your employment with this employer and decide to cash-out your account you may face a 20% penalty for the withdrawal.
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