If you want to take out some money from your 401k retirement plan prematurely then you are going to have to pay the early 401k withdrawal penalty. This means that you will have to pay a 10% fee on any money that you withdraw. And that is in addition to all the taxes you must pay.
Is there any way to get around this? There are two different methods to avoid this.
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 are these? Well there is a list of things that is acceptable and normally you have to be in some sort of hardship.
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. Collage is seen as a good growing opportunity that will benefit your future so you may be allowed to take some money out to help finance it.
Another thing you could do to avoid the penalty would be to get 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.
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.
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 it is suppose to be for retirement.
