What is a common fee charged to participants when they withdraw funds from a 401(k) plan?

Participants in a 401(k) plan may encounter withdrawal fees, which are often assessed when funds are taken out of the plan. This fee serves as a mechanism for the plan administrators to cover administrative costs associated with processing the withdrawal and can act as a deterrent to premature distributions, aligning with the long-term benefits of saving for retirement.

While the term "withdrawal fee" straightforwardly indicates a charge applied specifically during the act of withdrawing funds, other types of fees, such as transaction fees or servicing fees, may be related to different actions or ongoing account maintenance rather than directly tied to the withdrawal process. A lump sum fee is also not commonly used as a standard term in the context of 401(k) withdrawals, making withdrawal fee the most relevant and specific option in relation to withdrawing funds from a 401(k) plan.