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    Norma Linda Torres's Avatar
    Norma Linda Torres Posts: 1, Reputation: 1
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    #1

    Jan 30, 2008, 06:09 PM
    Penalty on early 401k withdrawl
    If I withdrew my 401k, early , What is the penalty amount in %?
    karahmia's Avatar
    karahmia Posts: 6, Reputation: 1
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    #2

    Jan 30, 2008, 07:07 PM
    Quote Originally Posted by Norma Linda Torres
    If I withdrew my 401k, early , What is the penatly amount in %?
    If you withdraw your 401k, early, you will be subject to current income taxes as well as a 10% early withdraw penalty.

    There are some ways where you can avoid this penalty; Some plans offer loans allowing you to borrow money from your 401(k) account, but you have to pay yourself back with interest, you need to check this interest rate in such a case. If your plan doesn't offer loans, you may be able to qualify for a severe financial hardship withdrawal if no other resources are available to you. According to the IRS a hardship withdrawal includes the following:
    - Down payment of primary residence
    - College tuition for you or your dependents
    - Your un-reimbursed medical costs exceeds 7.5% of your income and you made the
    Withdrawal to pay for these expenses.
    - Prevent eviction or foreclosure from your home

    I would recommend you to contact your Human Recources representative and/or reference your plan document. The reason is that some companies can be more lenient than others, and the way this issue is surrounded by complexities and the variety of the plan designs..!

    Best... :-)
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #3

    Feb 1, 2008, 02:58 PM
    The college tuition or down payment for primary residence hardship exception does NOT apply to 401K withdrawals, only to IRA withdrawals.
    karahmia's Avatar
    karahmia Posts: 6, Reputation: 1
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    #4

    Feb 1, 2008, 05:12 PM
    It depends on the plan. Some plans DO OFFER that in the package...
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #5

    Feb 3, 2008, 04:13 PM
    No, some plans allow you to BORROW the money for college costs. A withdrawal for education costs WILL incur the 10% penalty.
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