can i withdrawl a small amount from my 401K tax penalty free.?

Question

Got laid off after a few months from a new job. I have $2,300 in the 401K . I really could use the money and its not alot of money. Can I withdrawl this penalty free or is the penalty on any amount of money.

Thanks.

Answer 1

loss of job is one of the reasons that you can withdraw money from a 401k without the 10% penalty if you are under 59 1/2. You'll still have to pay regular income tax on the withdrawal but not the 10% penalty.

Answer 2

No unless you are over 59 and 1/2. Before that age you will be penalized 10%. But you have several choices. You could withhold 10% federal tax when you take out the money and not worry about it. You could just wait until you file your tax return to find out if you need to pay the $230. Also you might want to talk to your prior employer's human resources department and ask about possibly paying back the money under 60 days. Some plans give you 60 days to pay it back without penalty. Just note that the penalty is also on top of regular income tax that you will have to reconcile when you file your tax return.

Answer 3

You may be able to avoid the 10% penalty since you have lost your job IF you are age 55 or over. Otherwise merely losing your job won't avoid the 10% penalty for early withdrawal. The entire distribution is taxable however and at least 20% will be collected immediately and withheld from the distribution.

Answer 4

I will defer to the CPAs, but the 10% penalty is waived if you lose your job and you are at least 55 in that year. Bostianinmo is the only one who mentioned that.

pub 575 says "Additional exceptions for qualified retirement plans. The tax does not apply to distributions that are:
• From a qualified retirement plan (other than an IRA)
after your separation from service in or after the year you reached age 55 (age 50 for qualified public safety
employees),"

Answer 5

The penalty for early withdrawal (if you are under 59-1/2) is 10% on every dollar you withdraw. You also have to pay income tax on the withdrawn amount.

Answer 6

The only way would take money out wihout the 10% penalty in addition to your normal federal and state taxes is to use the loan provisions if they are available. This is less likely now that you have been laid off but it wouldn't hurt to check.

Otherwise, yo will pay somewhere between 25% to 50% of the funds you withdraw.