[CheriC]

I am nearly 60, not retired, but want to use some of my 401K income.

[smoothy]

You will pay a penalty

[ebaines]

Talk to your 401(k) plan administrator, but you will probably find that your plan does not allow active employees to take withdrawals unless the purpose falls into one of the six "hardship" cases:

1. Expenses for medical care previously incurred by the employee, the employee's spouse, or any dependents of the employee or necessary for these persons to obtain medical care;
2. Costs directly related to the purchase of a principal residence for the employee (excluding mortgage payments);
3. Payment of tuition, related educational fees, and room and board expenses, for the next 12 months of postsecondary education for the employee, or the employee's spouse, children, or dependents;
4. Payments necessary to prevent the eviction of the employee from the employee's principal residence or foreclosure on the mortgage on that residence;
5. Funeral expenses; or
6. Certain expenses relating to the repair of damage to the employee's principal residence.

Even if you qualify for a withdrawal keep in mind that you will pay ordinary income tax plus the 10% early withdrawal penalty (unless you will be at least 59-1/2 years of age in 2012). It is generally a better idea to take a loan from your account than a withdrawal - this avoids taxes and penalties and with your loan payments you are effectively paying yourself back .