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A Roth 401(k) allows for withdrawals without penalty or taxes if you’re at least 59½ and have had your account for at least five years. Early withdrawals: The Rule of 55
Generally, if you withdraw money from a 401(k) before the plan’s normal retirement age or from an IRA before turning 59 ½, you’ll pay an additional 10 percent in income tax as a penalty. But ...
You can withdraw up to $1,000 yearly from qualified retirements (401(k), 403(b), 457(b) or IRAs without incurring a 10% tax penalty. Tax Liability . All withdrawals are subject to ordinary income tax.
That’s because investors in 401(k) plans who have left their employers can tap their assets a touch earlier without penalty—at age 55—versus age 59.5 for IRA investors.
If the rule of 55 applies to you, it can be tempting to access your 401(k) penalty-free. But remember, the money in that account is supposed to be earmarked for your retirement.
Before you decide to take money out of your 401(k) plan, consider the following alternatives: Temporarily stop contributing to your employer’s 401(k) to free up some additional cash each pay period.
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