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The penalty is 10% of the
untaxed money you withdraw, plus applicable federal, state and local taxes on that amount.
So if you were to withdraw $5,000 from your 401(k) before age 59 ý, you would owe a
penalty of $500 (plus applicable federal, state and local taxes on the entire $5,000).
You will not have to pay the 10% penalty in the following circumstances:
ý If you become totally disabled.
ý If you die, and your beneficiary collects the money.
ý If you are in debt for medical expenses that exceed 7.5% of your adjusted gross income.
ý If you are required by court order to give the money to your divorced spouse, a child,
or a dependent.
ý If you are separated from service (through permanent layoff, termination, quitting or
taking early retirement) and you're at least 55 years old.
ý If you are separated from service and you have set up a payment schedule to withdraw
money in substantially equal amounts over the course of your life expectancy. (Once you
begin taking this kind of distribution you are required to continue for 5 years or until
you reach age 59 ý, whichever is longer.)
Any money withdrawn for the above reasons would still be subject to applicable federal,
state and local income taxes. |
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