Contacting the financial institution where the funds are held is the first step, explains Bankrate. Withdrawing funds may result in significant tax penalties especially if done before the age of 59 1/2. After this age, retirees may be required to receive regular distributions from retirement accounts.Continue Reading
Taxes may consume retirement account funds by as much as 70 percent if withdrawals are not made properly, as Bankrate reports. Before making an early withdrawal, individuals should consider other ways to access retirement money, according to Forbes. Borrowing from 401k accounts and paying back the funds with interest is one way to access the account balance while avoiding tax penalties.
At age 59 1/2, savers are permitted to begin making withdrawals without penalty but are required to pay income taxes, as reported by the IRS. At age 70 1/2, distributions from the account are required. These distribution amounts are calculated based on the Uniform Lifetime Table. A percentage of the balance must be removed each year to avoid significant tax penalties from the IRS. The percentage varies depending on the saver's age and the age of his or her spouse. Different account types also require different percentages. Surviving spouses can wait for the year the account owner would have been 70 1/2 years old before accepting distributions from the account.Learn more about Financial Planning