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    slese1's Avatar
    slese1 Posts: 2, Reputation: 1
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    #1

    Mar 26, 2007, 09:34 AM
    Using 401K Dollars
    I have cashed in my 401K and know I have 60 days to reinvest to avoid penalties. However, I now need surgery and was wondering if I could use some of my 401K money to pay for the surgery and not suffer penalties... is that possible?
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #2

    Mar 29, 2007, 11:52 AM
    You can avoid the penalties if the 401K money is used to pay for medical expenses IN EXCESS of the 7.5% AGI floor.

    In other words, you take your AGI of say $50,000. 7.5% of that is $3,750. Your surgery costs $20,000. You pay $5,000 out of pocket, then use $15,000 of 401K money to pay the rest. Since the $15K was exceeded 7.5% of your AGI, no 10% penalty will be due.
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