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Q&A: "If You Withdraw Money from a 401(k) Plan, Can You Put Money Back Into it Later? Are There Any Restrictions on This?"

Retirement Accounts Tax


If you withdraw money from a 401(k) plan, can you put money back into it later? Are there any restrictions on this?

Larry's answer: 

If your 401(k) plan allows loans, you can borrow up to 50% of your vested account balance to a maximum of $50,000. The loan will then have to be repaid, usually over a 5-year period. Any loan payments you fail to make will be considered taxable income...and if you're under age 59.5 those non-payments will also be subject to the 10% federal penalty tax.

On the other hand, if you take a regular withdrawal ("distribution") there's is no direct way to pay this back. It will be considered taxable income and the same potential penalty tax (above) may apply. You'll just have to increase your future contributions through payroll (up to contribution maximums) and try to re-accumulate what you distributed, plus any potential growth you missed out on. Note that if you take an eligible "hardship distribution," you will not be permitted to contribute to your 401(k) for 6 months following the withdrawal. 

Hope that helps. All the best.

Originally posted on NerdWallet's Ask an Advisoron June 13, 2014.