Your 401(k) When Switching Jobs

Beware–the 10% Early Withdrawal Penalty Tax

401(k) plans allow you to begin withdrawing money, without penalty, after age 59½. However, there is a 10% penalty tax on withdrawals made before age 59½ (if you don't roll it over) from your 401(k) plan, unless the distribution is made under one of the limited circumstances allowed by law. That is, there is a penalty for taking your money "too soon."

Some Exceptions to the 10% Early Withdrawal Penalty for 401(k) Plans

The 10% early withdrawal penalty does not apply to these situations:

  1. Distributions made after age 59½
  2. Distributions made after you separate from service during or after the year in which you reach age 55
  3. Distributions that you roll over to another qualified retirement plan, tax-sheltered annuity, or IRA within 60 days.
  4. Distributions made due to disability or after your death
  5. Distributions for qualified medical expenses that exceed 10% (7.5% age 65 or older) of adjusted gross income
  6. Distributions after separation from service that are part of a scheduled series of substantially equal periodic payments

IMPORTANT NOTE: Using your retirement plan savings for non-retirement purposes should always be your last resort.
For more information, see the section Distributions Over Your Life Expectancy.

Share Article:
Add to GooglePlus
Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA/SIPC. Investment & Insurance Services at Flagstar Bank is a trade name of Flagstar Bank. Infinex is not affiliated with Flagstar Bank. Certain insurance products are offered through Douglas Insurance Agency, doing business as Flagstar Investment & Insurance Services, which is affiliated with Flagstar Bank. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.
BrokerCheck