Is there a way to withdraw from my 401(k) without being penalized?
I recently had to borrow from it due to hardship (medical) and they charged me 20%.
Hi Carla, if your medical expenses also created a disability, then a distribution from the 401(k) may avoid the 10% penalty if you are under age 59 1/2. The ways that you can take distributions from a 401(k) without penalties are:
1. take "normal" distributions between ages 59 1/2 - 70 1/2, take at least the Required Minimum Distributions (RMD) after age 70 1/2.
3. disability. the 20% charged was probably not a penalty, it was required tax withholding-which you will likely have to pay when you file taxes for 2015. | 12.01.15 @ 20:05
Hi Carla - I am sorry about your hardship. You can take a distribution from an 401(k) (or IRA) penalty-free to pay for certain medical expenses. However you have to be careful on the amount that you are able to take out. Beginning in 2013, only expenses that exceed 10% of your adjusted gross income (AGI) are eligible for this penalty-free treatment, and you must pay those medical expenses in the same year you take the distribution. Before 2013, medical expenses in excess of 7.5% of AGI were eligible. Check with your accountant on the amount that you can take out and if your specific medical expenses qualify.
| 12.01.15 @ 20:08