Use a 401(k) planning calculator to calculate the penalties of an early withdrawal from the 401(k), states Bankrate.com. This is done by taking the amount you want to withdraw, the federal income tax rate, the state income tax rate, the age of retirement, the number of years left before you retire and the expected rate of return.Continue Reading
As of 2015, the government charges 10 percent on any withdrawal made from 401(k) before you reach the age of 59 1/2 years, explains the Financial Industry Regulatory Authority. If you are using the money for financial hardships, purchase a first home or pay for higher education expenses, you may get a waiver of that penalty. However, the IRS does not consider being broke as a hardship. You also need to know what your minimum distribution is.
There are 12 exceptions the IRS provides that allows you to avoid the penalty, notes the IRS. You are only required to start withdrawing from your 401(k) once you turn 70 1/2 years old, If you are still working when you turn age 70 1/2, you can postpone that withdrawal until April 1 of the next year. You are able to withdraw more than the minimum amount,Learn more about Financial Planning