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    Toyotateknician's Avatar
    Toyotateknician Posts: 2, Reputation: 1
    New Member
    		  
    #1

    Oct 4, 2007, 10:15 AM
    Early 401K withdrawal penalties, if unemployed
    Hi, I am 31 years old, and my wife is 7 months pregnant. I have money in my 401k and I heard through one of your questions/answers that if you are unemployed, and paying insurance premiums, that you will not be taxed on this money? I have not received my unemployment check yet, and I am going to have to continue insurance coverage through Cobra for $647 a month. My wife doesn't make a lot of money so its kind of an emergency situation. Can you help answer this question? Will they penalize me, or will they take a massive amount or my money out of my 401k cash out check? I only have $3,450 in there total. Thank you
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
    Computer Expert and Renaissance Man
    		  
    #2

    Oct 4, 2007, 10:17 AM
    Not sure where you heard that, but its not true. You will lose $345 to the 10% penalty and the $350 will be added to your taxable income for the year. They may withhold $700 toward that tax liability.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #3

    Oct 5, 2007, 06:39 AM
    Actually, paying health insurance premiums IS one of the exceptions to paying the 10% Early Withdrawal Penalty.

    Regardless, if that is the ONLY way you can make your health insurance premium payments, you should DO iot.

    This is unusual advice for me, but your wife's health is of the utmost importance while pregnant, so you HAVE to have health insurance.
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
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    #4

    Oct 5, 2007, 06:57 AM
    Whoops, I don't recall seeing that, thatnks for the correction.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #5

    Oct 5, 2007, 07:28 AM
    That's okay; it is not common knowledge.
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