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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 penalty takes away 10% of any money 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 do qualify for one of the hardship requirements then you may be allowed to take money out without having to pay the penalty on it. So, what type of things qualify? Usually you have to be in a terrible position.

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. Not that I would recomend getting disabled to take money out from your plan early, but it is one situation. Another time you may be able to avoid this penalty is if you are using the money to grow.

For example, say you want to go back to school and need help paying down your collage loans. Going to collage is a fantastic growing opportunity that can be a big aid into your future.

If you don’t fit into one of those predefined situations they you could always get out a 401k loan. You would not be forced to pay taxes or the penalty on it because after all, a loan is not income. However because it is a loan you do have to pay interest.

That is not the only con for doing this. Many plans will either limit the amount of money you can invest or stop you from investing more money into your 401k until you pay the loan back. This can be the most devastating thing you can do to your retirement saving if you are going to have the loan out for a while.

While there are many different options for anyone who wants to get out a 401k withdrawal prematurely, it should still be a last resort kind of thing. After all 401ks are suppose to be for the future.

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