I am 71 and still working. What is my pennalty for withdrawal? I do not like rumors of Uncle Sam wanting to tell me where to invest my money for continuous retirement income.

There is no early withdrawal penalty at this age. The withdrawal must be reported as income on your tax return. Your U.S. Tax Return: Elective Deferrals 401(k) Plans (http://taxipay.blogspot.com/2008/08/elective-deferrals-401k-plans.html)

I'm curious about what rumors you are hearing. 401(ks) are self directed within the investment options offered by your employer. I have not heard anything about changing that.

ScottGem: I believe the OP is referring to internet rumors about a statement that Obama made a week or two ago. He suggested that retirees should consider investing a portion of their 401(k) or IRA accounts into traditional annuities - to remove risk and provide the retiree with a steady stream of monthly income. It's good advice. I'm not saying annuities are appropriate for all, but they are certainly prudent to consider, especially for those retirees who do not get a pension. His administration is also looking into possible tax breaks for annuity investments - perhaps waving income taxes on the first $10K of withdrawas per year. Now, the internet being the crazy place it is - this gets been blown out of proportion to suggest that Obama is going to force people to invest their retirement account in annuities. Ain't true, but that doesn't stop the hysteria.

See the following article from the NY Times: Your Money - The Unloved Annuity Gets a Hug From Obama - NYTimes.com (http://www.nytimes.com/2010/01/30/your-money/annuities/30money.html)