Penalties for tapping 401(k) early

Are you putting all of your retirement savings into government qualified accounts (401(k), 403(b), TSA, IRA, SEP, SIMPLE, etc)?  If so, then you need to consider the possibility of needing access to the money before the age of 59 ½, for things like paying off debt or major capital purchases.

Accessing a government qualified retirement account before the age of 59 ½, with a couple of small exceptions, results in a 10% penalty in addition to the income taxes due.  According to an article in Bloomberg earlier this year, the IRS collected $5.7 Billion in 2011 from early withdrawal penalties from qualified retirement accounts.  CLICK HERE to read the full article.

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