Are you considering cashing out your 401k due to financial hardship or debt?
In today’s video we’re covering what you need to know before you take money from your 401k or completely cash it out and we’re going to show you how to keep more of your money and how to avoid paying 401k early withdrawal penalties.
Should I Continue Funding My 401k: • Should I Stop Funding My 401k?
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Obviously it’s not ideal to touch your retirement savings, but sometimes your 401k is the only resource you have should you need cash emergencies.
If you have to take cash from your 401k, you want to withdraw the money with the least amount of impact on your finances…and financial future.
The IRS requires automatic withholding of 20% of a 401k early withdrawal for taxes.
Along with the withholding taxes, the IRS will also hit you with a 10% penalty on all funds withdrawn when you file your tax return – if you’re under the age of 59 ½.
59 1/2 is when the IRS says you withdraw money from your 401k and avoid the 10% penalty.
There are a few ways to avoid the 401k withdrawal penalty, such as qualifying for the 55 and separated from service rule, qualifying for a hardship withdrawal, and taking out as little as possible.
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