Taking Money From A 401k Early Without The Penalty
If you are under the age of 59 ½ and want to take out money from your 401k then you are going to get hit with something called an early 401k withdrawal penalty. This means that you will have to pay a 10% fee on any money that you withdraw. And because this money is considered an income you would also have to pay taxes.
Is there any way to get around this? There are a couple of things you could do to get around it.
If you happen to fall into one of the hardship categories according to your plan, you could be able to withdraw money and avoid paying the early penalty. So, what type of things qualify? There is a lot of things that may qualify, normally you have to be in some kind of bad situation.
An example of something that could be classified as a hardship would be if you where not able to work because of some disability, in that case you might be able to use your 401k to help you. There are also a few rules that allow you to take money out in order to help you grow.
An example for this would be, wanting to pay off some collage loans. Going to collage is a fantastic growing opportunity that can be a big aid into your future.
If you do not qualify, but still want to take money out you may be able to take out a 401k loan. Because a loan is not considered income you will not have to pay either the early withdrawal penalty or taxes on it. But it is still a loan, that means if you take it out it has to be paid back and with interest.
One bigger problem is that many plans will limit the amount you can invest into your plan while you have loan out. Taking a loan out can be the biggest set back to your savings, especially if you have that loan out for a long time.
So, while there are a couple ways to take money out a 401k withdrawal prematurely, it should still be a last resort kind of thing. After all it is suppose to be for retirement.
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