Withdrawing from a 401k plan or IRA before the age of 59 ½ will result in penalties and taxes unless the withdrawals qualify for an exemption. The government allows for penalty-free withdrawals from retirement plans in the event of hardship, but the amount taken from the account may still be subject to taxation. While wanting to pay down debt or needing money to make rent will not qualify for an exemption, there are 8 situations that will with various stipulations.

  1. Injury or illness that leads to unreimbursed medical bills and/or funeral expenses.
  2. Becoming disabled before reaching age 59 ½.
  3. Death of an IRA account holder allows beneficiaries to withdraw penalty-free.
  4. When owing taxes to the IRS results in a levy against the account.
  5. Money needed to pay health insurance premiums when unemployed.
  6. Buying a home for the first time.
  7. Substantially equal periodic payments (SEPPs).
  8. Qualified higher education expenses. 

Even in times of hardship, early withdrawals from a retirement plan should be a last resort. When money is taken out of an account, future returns will be affected. We’d be happy to offer more information and advice so please call 800-689-3935 to speak with one of our financial advisors.