Keep The Course: Commonly Asked Questions-How do I avoid the 10% early withdrawal penalty

Each Wednesday 401kBasics posts a new article in a weekly series called “Keep the Course”. This series is designed to give the average consumer information on how to keep their 401k plan on track! Your feedback or suggestions on future articles is welcome.

Over the next few weeks, 401kBasics will feature some of the most commonly asked questions, the first of which is:

“I’m under 59.5 years old, but retiring from my company already. Is there any way to avoid the early withdrawal penalty of 10% other than rolling over my money?”

There are two options for withdrawing money and avoiding this penalty.

  1. Wait until you’re at least 55 years old before leaving your employer. If you separate from service at 55 years old or older, then the 10% withdrawal penalty is waived.
  2. Regardless of your age, if you establish installments from your 401(k) plan, you will not be subject to the 10% early withdrawal penalty.

In both of these examples, please keep in mind that you will still be subject to income tax, but you will have successfully avoided the 10% early withdrawal penalty before the age of 59.5 years old.

This site is for entertainment purposes only. 401kBasics and it’s authors are not financial advisors and no information found on this site should be construed as financial advice.

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One Response to Keep The Course: Commonly Asked Questions-How do I avoid the 10% early withdrawal penalty

  1. Great site!Thanks for sharing!

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