I'm 34 and am considering cashing in my 401K from a previous employer. My wife and I are self employed and in addition to considering putting this money into growing our business we have also been presented with an opportunity to invest in a local business that has plans to expand in the next year. Is there any type of overide on the penalty for early withdrawal as in the case of a 1031 exchange?

Thanks

I'm 34 and am considering cashing in my 401K from a previous employer. My wife and I are self employed and in addition to considering putting this money into growing our business we have also been presented with an opportunity to invest in a local business that has plans to expand in the next year. Is there any type of overide on the penalty for early withdrawal as in the case of a 1031 exchange?

thanks
A 1031 exchange, I believe, relates to life insurance, not 401(k) tax sheltered plans, so my answer is no, for the use you mentioned, I know of no provision to waive, defer or otherwise, reduce the penalties. I might add that the penalties are quite severe, first, there is a 10% penalty. Then the IRS, I believe and stand corrected if not correct, holds 20% until you file you income tax returns, then you pay income tax on the proceeds just as though it were "earned" income at the tax rate specfied when you file your taxes. I recommend ANY OTHER MEANS for financing your investment objectives. This is "special" money designed to be used only for retirement purposes and shoud be treated as such. That's why the Govt imposes such severe penalties. Anyone else want to add something or correct me.