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You should check with your
company's Human Resources or Benefits representative regarding the rules for your specific
plan. Below are some general situations where distributions are permitted, and the related
penalties and tax implications for each.
Under the following circumstances, you will not have to pay the 10% penalty:
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Any money withdrawn for the above reasons would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.
You may qualify for a "financial hardship" withdrawal if you need the money:
1) to pay college tuition for yourself or a dependent,
provided it's due within the next 12 months;
2) to make a down payment on a primary residence;
3) to pay unreimbursed medical expenses for you or your dependents; or
4) to prevent foreclosure or eviction from your home.
While distributions are generally allowed for those
reasons, you will still have to pay the 10% premature distribution penalty. All applicable
federal, state and local income taxes are also due on the amount you withdraw. |
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