2 Ways to Get a 401k Distribution

If you have retired before you expected, then you may be aware that there is a tax penalty to pay on early 401k distribution. Getting the money now is obviously important, but you should also be aware that you could get into trouble with your IRS office by taking out too much money at once. If you happen to take out a 401 distribution before you are 59 and a half, you may be charged up to 10% early withdrawal tax. However, you can avoid this tax by using other methods.

Take Early Retirement

If you want to retire at the age of 55, then the government will understand this common procedure, and you can avoid early withdrawal tax. However, you cannot retire early and leave the money in your account until you are 55; you need to work until that age, and then terminate your employment.

Paying Medical Expenses

As the cost of hospital stays or emergency treatment is so high, you may need to take out money from a 401k. If you take out money which does not exceed your deductible medical treatments for the year, then you will not receive any tax penalty, even if you don't use those funds to pay the medical bill.