401K Early Withdrawal Penalties
Well, it is possible for early 401k withdrawal. However, it all depends on your age and retirement status. There are 401k early withdrawal penalties if you do not find into the prescribed criteria. |
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If you withdraw money from your 401k retirement plan before your reach the age of 59-1/2 years, you will have to pay a 10 percent penalty on the taxable amount. You will also have to pay income tax on the early 401k withdrawal amount. However, there are certain instances when you do not have to pay 401k early withdrawal penalties.
If you withdraw money from your 401k plan, remember that 20 percent of the taxable portion of your withdrawal amount will be withheld in your 401k account. Depending on your tax bracket, you will end up paying around the same amount when you file your income tax!
Another point to remember is that besides paying the 10 percent 401k early withdrawal penalty and income tax, you might also end up paying local and state taxes. That is why it is important to be sure that you really need to withdraw money from your 401k plan.
The good news is that you will not have to pay 401k early withdrawal penalties if you are withdraw money when you leave your company the same year you reach the age of 55 years (or more); you withdraw money to meet medical expenses that are more than what is covered by your medical insurance; you withdraw money because you are physically or mentally disabled and cannot work any longer because of the disability.
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