[WJ092300]

My husband lost his job 7 months ago and we have had to withdraw from my 401k just to survive. Is there any way I can avoid paying 100 percent of the penalties?

JAP

[ebaines]

The penalty is 10% for early withdrawal. The only exceptions to the 10% penalty rule for people under 59-1/2 years of age are for withdrawals that are:

• From a qualified retirement plan (other than an IRA) after your separation from service in or after the year you reached age 55 (age 50 for qualified public safety employees).
• Distributions made as part of a series of substantially equal periodic payments (made at least annually) for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (if from an employer, the payments must begin after separation from service) - this is known as a section 72(t) withdrawal
• Distributions due to total and permanent disability.
• Distributions due to death (you are the beneficiary of a deceased plan participant).
• You have unreimbursed medical expenses that are more than 7.5% of your adjusted gross income.
• Distributions from a qualified retirement plan to an alternate payee under a qualified domestic relations order.
• Distributions due to an IRS levy of the qualified plan.
• Distributions to reservists while serving on active duty for at least 180 days.

Also don't forget that he has to pay ordinary income tax on the withdrawal.