Is there a penalty for early 401K withdrawal?

Answer by  Annie82 (373)

Yes, unless it's used for education, first home, or financial burden due to medical expenses. You have to prove it and fill out a form with your income tax forms. You can pay your taxes on it when you withdraw, or not. Income tax time you'll pay both.

Answer by  drJ (841)

There are specific "hardship" withdrawals which you can apply for, where you will not be penalized 10%. You are still responsible for paying taxes on the withdrawal.

Answer by  John (9008)

Not only does the 401(k) plan itself charge a penalty for early withdrawal, there are also often devastingly bad tax consequences. You should avoid early 401(k) withdrawals if at all possible. Many 401(k) plans will let you take loans from the balance, which is usually cheaper.