How Long Does It Take to Get a 401(K) Disbursement Check?

A common misconception with 401(k)s is that once money is contributed to one, it’s locked away. Although it’s often not the best idea, 401(k) participants can access their funds any time they want. How long it takes to get 401(k) funds through a disbursement check can vary. However, it’s a good idea to understand the process before deciding whether to take a 401(k) disbursement.

Typically, the time it takes to receive a 401(k) disbursement check is two to four weeks. Your 401(k) administrator will need time to process your request; then, it will take time for the check to travel through the mail system.

If you need your 401(k) funds immediately, perhaps other avenues to obtaining the funds would be best. However, unless you have a fully-funded emergency fund, your 401(k) may be the most significant account you have.

Let’s look into how to request a 401(k) disbursement and the process of receiving the funds. This way, you can be better informed if taking a 401(k) disbursement is best for you.

What are the penalties for taking a 401(k) disbursement?

There are two kinds of 401(k) disbursements, retirement disbursements and early retirement distributions.

Retirement disbursements are pretty straightforward. Once you turn 59½, the IRS allows you to begin taking distributions from your 401(k) as income during retirement. Income tax will be assessed on any amount you withdraw since you made contributions with pre-tax earnings.

Early retirement disbursements are withdrawals from a 401(k) prior to turning 59½. As a result, the IRS issues a 10% penalty tax for any amount withdrawn from a 401(k) before reaching 59½.

How to request a 401(k) disbursement from your plan

Many 401(k) accounts these days are managed online. In the same way a checking account is managed, a 401(k) can be accessed through an online portal where account holders can do pretty much anything they want with their 401(k)s.

Most 401(k) plans have a way to request a disbursement straight from the online account. You can set any amount allowed by the plan or IRS guidelines and request how to receive your funds.

Processing a distribution will depend on the 401(k) administrator’s process. However, most disbursements will process within one or two weeks.

Factors that can delay the disbursement process

Although it still depends on the institution that manages the 401(k), there can be delays in the process that are outside of your control and even the plan’s administrator’s control.

If you’re required to pay the 10% penalty tax, this may require an additional step in processing. However, if you’re exempt from the 10% penalty through any of the exemptions the IRS outlines, this can add some significant time. Your 401(k) administrator may have to submit additional documentation and proof that your disbursement meets the criteria for waiving the 10% penalty.

Receiving your disbursement check by mail

Once your disbursement is approved and processed, you have two options in how to receive the funds you’re taking out. You can opt for an automatic ACH into your bank account, or you can have the 401(k) administrator send you a physical check.

If you chose to receive a check, there might be an additional period for them to draw up the check and prepare it to be sent to you.

Then, you’ll need to wait the standard amount of time it takes for the postal service to get the check to you.

In total, from the time you submitted your disbursement request to receive your check in the mail, it may take two to four weeks—plus the additional time it takes for the check to be deposited into your bank account.

You may have to deposit your 401(k) disbursement check soon after receiving it

If you requested a disbursement to rollover your 401(k) to another 401(k) or an IRA, you need to deposit the check within 60 days.

When taking a 401(k) disbursement to roll over the funds into another eligible retirement account, the IRS waives all taxes and penalties. Since you’re putting the money back into a retirement account, these disbursements are allowed.

However, fail to deposit the 401(k) disbursement check in time, you may have to pay income tax and a 10% penalty on the amount you withdrew.