The rumors are true! You better believe it, there are certain 401k early withdrawal penalties. No matter what retirement plan you have there is no escape from the consequences of taking your money out early. You cannot withdraw money before you retire! Or is that entirely true? It is no falsehood that you will receive a harsh penalty for taking your money out early, but are there reasons you can access your money early that do not make you suffer the punishment? Yes, in fact—there are five reasons that will allow you to miss the 401k early withdrawal penalties.

Five Exceptions to the Penalty Rules:

Here are the five circumstances that are required of you, in order to be free of punishment. The first deals with being laid off and that you have made agreements of receiving distributions of payment from your 401k account over a lifetime. It is upon the death and disability of the participant of the plan that is the second reason for penalty free withdraws. The third is upon the age of fifty five years old; you either retire early or leave a job. Fourth is when your medical expense is more than seven point five percent of your gross adjusted income. And the last deals with agreements and court mandated withdraw from your 401k in accordance with a separation or divorce decrees. For these five reasons and these alone are you allowed to access the money in your 401k without having to pay the 401k early withdrawal penalties.

The Penalty!

It is an extra ten percent tax on the money when you withdraw from your 401k account early. Realize that this does not include the regular tax that you are required to pay when taking money out of your 401k. This penalty includes retirement plans like 401k such as 403b, IRAs, and sometimes Roth IRAs. If you have a SIMPLE IRA, know that your consequence of early withdraw is more severe. It is a twenty-five percent additional tax.

Reasons for Early Withdraw:

It is not possible to take money from your 401k without having very important reasons. The government will only allow you to make withdraws due to financial hardships. These include making crucial home repairs, paying for large medical or funeral bills, paying for college tuition, or making a payment on a house to deter foreclosure. Know that for these reasons you will have access to the money but that the 401k early withdrawal penalties still apply.

You Have Read All About It!

Now that you know the truth of the 401k early withdrawal penalties, you can make the better financial choices for your family. Use your money wisely! Whether or not it is best to pay the penalties, at least you now know the options dealing with your 401k retirement plan. Do not shoot in the dark when it comes to your financial future, learn the information you need to answer your tough questions.