If you need to take money out of your 401(k) plan before retirement, there are three ways to accomplish that. The first way is to take out a 401(k) loan. But 401(k) loans are not always the best way to borrow money. Interest paid on a 401(k) loan is generally not tax-deductible. To figure out your best option, calculate the true cost of borrowing in each case.
Second, most 401(k) plans will allow you to take a hardship withdrawal. Make sure you look at all your available options before taking a 401(k) loan or a hardship withdrawal. Finally, if you are over age 59½ or meet other exceptions to the 10% early withdrawal penalty, you can withdraw your 401(k) money without penalty. You will have to pay ordinary income tax on the amounts received. See the section Your 401(k) When Switching Jobs.
IMPORTANT NOTE: We generally recommend that you do not withdraw money from your 401(k). Explore all other alternatives first.
SUGGESTION: Penalty-free withdrawals can be made from an IRA for qualified higher education expenses.
SUGGESTION: A penalty-free withdrawal from an IRA up to a $10,000 lifetime limit can be made for a qualified first-time home purchase.
Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA/SIPC. Ion Investments is a trade name of Ion Bank. Infinex and the bank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.