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Based on 401 (k) withdrawal rules, if you withdraw money from a traditional 401 (k) before age 59½, you will face — in addition to the standard taxes — a 10% early withdrawal penalty. Why?
Making an early withdrawal from your 401 (k) might sound like a tempting idea — after all, it is your money. But once you know the ramifications, you may feel differently.
But what are the exact rules around early withdrawals? Can you pull one off without a penalty? Financial guru Suze Orman took to her blog to explain the rules around 401 (k) early withdrawals ...
5 ways to avoid taking early withdrawals on your 401 (k)s and IRAs James Royal, Ph.D. January 10, 2024 at 8:57 AM
Retirement plans such as a 401 (k) or 403 (b) may allow you to take hardship withdrawals. The situation is a bit different for IRA accounts, which permit early withdrawals at any time.
When distributions are made, the taxable portion of the distribution will be calculated as the ratio of the after-tax contributions to the total 401 (k) basis. The remainder of the distribution is tax-free and not included in gross income for the year.
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