Greetings, I am needing to take a withdraw to assist me in paying for my health premium (COBRA) and the co-payments, deductibles, etc. associated with my medical expnses. I am currently receiving unemployment benefits, but it is certainly impossible to pay for all of my medical expenses with the few dollars received from these benefits. I have a small savings in 401k. My question is: should I take a withdrawal directly from my 401K or should I rollover the funds into an IRA first, and then take a withdrawal from there? Will the taxes and/or penalties differ? Are there any special tax circumstances I may qualify for? FYI-I have tried to sign up for an HSA, but my coverage doesn't qualify as a HDHP (High Deductible Health Plan). Please help!

Thanks!

There are no differences in the penalties and taxes you owe whether for early withdrawal of money from an IRA or a 401(k) - in both cases you will owe a 10% penalty plus income tax (federal and state) on the amount you withdraw. The only difference is that if you are separated from the job where your 401(k) is located (i.e, no longer working there), you can start withdrawing from the 401(k) without penalty at age 55, whereas for the IRA the minimum age is 59-1/2. Another advantage of the 401(k) is that most plans allow you to borrow from your account, but only if you are still employed, so this won't help you.