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If your employer’s 401(k) is administered by Empower (one of the largest 401(k) record-keepers in the U.S.), you may need to take a loan, roll it over to an IRA, or withdraw it at some point. This guide covers every major 401(k) action: how to initiate it, the fees and tax implications, processing times, and the gotchas that trip up many account holders.

For the broader Empower ecosystem, see Is Empower Worth It?.

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What’s in this guide

Quick reference for each action

ActionWhen you can do itTax implicationsProcessing time
LoanWhile employed (typically)Tax-free if repaid on schedule1-2 weeks
Direct rolloverAfter leaving employer (or in-service if 59.5+)Tax-free if rolled to traditional IRA2-4 weeks
Roth rolloverSame as aboveTaxable on rollover2-4 weeks
Withdrawal under 59.5While employed (hardship) or after10% penalty + ordinary income tax1-2 weeks
Withdrawal at 59.5+AnytimeJust ordinary income tax1-2 weeks
RMD (age 73+)Required annuallyOrdinary income taxOngoing

Empower 401(k) loan

How to initiate:

  1. Sign into empower.com with your 401(k) credentials.
  2. Navigate to Account → Loans.
  3. Click Request a Loan (or “Apply for a Loan”).
  4. Specify:
    • Loan amount.
    • Repayment period.
    • Reason (general or qualifying event).
  5. Review terms.
  6. Submit.
  7. Wait for employer plan approval.
  8. Funds disbursed via direct deposit or check.

Processing typically: 5-10 business days for approval; funds arrive within 1-2 weeks total.

Loan limits, interest rates, and repayment

Loan limits (per IRS rules):

  • Maximum: lesser of $50,000 or 50% of vested balance.
  • Minimum: typically $1,000.
  • Per-loan limits in your plan may apply.

Interest rates:

  • Set by your plan, typically prime rate + 1-2%.
  • Interest is paid back to your own 401(k), not to a bank.

Repayment:

  • Through payroll deduction automatically.
  • Typical term: up to 5 years (longer for primary home purchase).
  • Quarterly minimum payments required.
  • Pre-payment usually allowed.

Pros of a 401(k) loan:

  • Interest goes to yourself.
  • No credit check.
  • Fast access to funds.
  • No tax implications if repaid.

Cons:

  • If you can’t repay (lose job, etc.), the loan becomes a distribution.
  • Funds taken out aren’t earning market returns.
  • Repayments are after-tax dollars (effectively double-taxation on the interest).

What happens if you leave your job with an outstanding loan

This is the biggest 401(k) loan trap:

  • When you leave (quit, fired, laid off), the loan typically becomes due in full.
  • Most plans give a grace period (60 days or end of year + tax filing deadline).
  • If unpaid, the outstanding balance becomes a distribution:
    • Treated as taxable income.
    • 10% early-withdrawal penalty if under 59.5.
  • 401(k) records this as a “deemed distribution” on your 1099-R.

Workaround:

  • Repay the loan immediately if you have funds.
  • Roll over the 401(k) to an IRA at your next institution; the loan converts to a distribution but you can usually still rollover the remaining balance without further penalty.

Empower 401(k) rollover to IRA

After leaving your employer (or for in-service 59.5+ withdrawals where allowed):

  1. Open an IRA at your destination broker (Fidelity, Vanguard, Schwab, etc.).
  2. Initiate the rollover at Empower:
    • Empower → Distributions → Rollover.
    • Specify destination broker info.
    • Choose direct rollover (recommended) — funds transfer broker-to-broker.
  3. Empower processes the rollover:
    • 2-4 weeks typical.
    • Funds liquidate (most plans require sale of holdings).
    • Direct transfer to your IRA.
  4. At the new broker:
    • Funds arrive as cash.
    • You re-invest per your plan.

The rollover is tax-free if done correctly via direct rollover.

Rollover types — direct vs indirect

Direct rollover (recommended):

  • Funds transfer broker-to-broker.
  • Never touches your bank account.
  • No tax withholding.
  • No 60-day deadline.
  • Tax-free.

Indirect rollover:

  • Empower mails you a check.
  • You have 60 days to deposit into a new IRA.
  • Empower withholds 20% for taxes (you must replace this from other funds).
  • If you miss the 60-day deadline, the entire amount is taxable + penalty.

Always do direct rollovers. Indirect is a trap.

Empower 401(k) withdrawal

Withdrawing money from your 401(k) (vs. loan or rollover):

  1. Empower → Distributions → Withdrawal.
  2. Choose:
    • Full withdrawal — entire balance.
    • Partial withdrawal — specific amount.
  3. Specify reason:
    • Termination of employment (most common).
    • Reaching 59.5 (penalty-free).
    • Hardship (qualifying event).
    • Death/disability (rare).
    • In-service withdrawal (some plans, 59.5+).
  4. Specify destination (your bank account).
  5. Submit.

Processing: 1-2 weeks.

Hardship withdrawal vs in-service withdrawal

Hardship withdrawal:

  • For specific qualifying events: medical expenses, primary home purchase, education, foreclosure prevention.
  • Subject to 10% early-withdrawal penalty if under 59.5 + ordinary income tax.
  • Limited to amount needed to address the hardship.

In-service withdrawal:

  • Some 401(k) plans allow it at age 59.5 even if still employed.
  • No 10% penalty (because over 59.5).
  • Just ordinary income tax.

For specific qualifying-event details, consult your plan summary or call Empower at the 401(k) number on your account.

Tax implications

Pre-tax 401(k) (Traditional):

  • Contributions reduced your taxable income when made.
  • Withdrawals are fully taxable as ordinary income.
  • 10% early penalty if under 59.5.

Roth 401(k):

  • Contributions made with after-tax dollars (no current tax benefit).
  • Qualified withdrawals (after age 59.5 + 5-year hold) are tax-free.
  • Non-qualified withdrawals: earnings portion is taxable.

Mixed accounts: If you have both pre-tax and Roth contributions, withdrawals are typically pro-rata.

State taxes apply on top of federal for most states.

Common mistakes

  1. Not rolling over after leaving — leaving 401(k) at old employer is fine but can complicate management. Most people benefit from rolling to a low-cost IRA.

  2. Indirect rollover — choosing “send check to me” instead of direct rollover. The 20% withholding + 60-day deadline traps many.

  3. Hardship withdrawal as easy option — taking 401(k) funds when other options exist (loan, savings, etc.) is expensive (taxes + penalties).

  4. Not rolling over loan balance — if you leave with an outstanding loan, you can typically roll over the remaining balance + treat the loan as distribution (still taxable + penalty but at least you preserve some).

  5. Premature withdrawal — withdrawing before 59.5 unless absolutely necessary; the 10% penalty + tax stings.

  6. Forgetting RMDs — at age 73+, Required Minimum Distributions apply. Missing them triggers 25% penalty.

  7. Not optimizing fund choices — many people leave their 401(k) in default funds with high fees. Use Empower’s Fee Analyzer.

Best practice: Avoid 401(k) loans and withdrawals when possible. The tax implications and lost compound growth are expensive long-term. If you must, do a direct rollover to preserve tax advantages.

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FAQ

Can I take multiple 401(k) loans?

Yes, subject to plan limits and aggregate maximum.

What happens to my 401(k) loan if I get fired?

Same as voluntary leaving — typically becomes due. Grace period varies by plan.

Can I rollover a 401(k) to a Roth IRA?

Yes (Roth conversion). Pre-tax balance becomes taxable when converted; pay the tax now to avoid future RMDs and have tax-free withdrawals.

How long does Empower take to process a rollover?

2-4 weeks typically. Larger amounts or complex plans take longer.

Can I rollover Empower 401(k) directly to Fidelity?

Yes — direct broker-to-broker rollover. Open the Fidelity IRA first, then initiate at Empower.

Will my Empower 401(k) loan be reported on my credit?

No. It’s not a traditional loan; doesn’t affect credit.

Can I take a hardship withdrawal for student loans?

Generally no — student loans aren’t typically a qualifying hardship. Education expenses (tuition) may qualify.

What if my employer changes 401(k) administrators?

Your assets transfer to the new administrator. Read the transition documents carefully; sometimes there’s a brief blackout period.

Can I rollover Roth 401(k) to Roth IRA tax-free?

Yes, if direct rollover.

What’s the difference between “termination distribution” and “rollover”?

Termination distribution = take cash; tax + penalty applies. Rollover = transfer to IRA; preserves tax-deferred status.

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