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Can a 401(k) avoid a 10% early withdrawal penalty?
Qualified retirement plans, such as 401 (k)s, 403 (b)s, profit-sharing plans and Keogh plans, offer a few more options for avoiding the 10% early withdrawal penalty than IRAs do, including: Division of retirement account assets in a divorce under a Qualified Domestic Relations Order (QDRO).Do 401(k) withdrawals have a penalty?
For early withdrawals that do not meet a qualified exemption, there is a 10% penalty. You will also have to pay income tax on those funds. Both calculations are based on the amount withdrawn. How Old Do You Have to Be to Cash Out Your 401 (k) Without Penalty?Do you owe the IRS a 10% early retirement penalty?
On the other hand, taking distributions from your retirement accounts before age 59½ could cause you to owe the IRS a 10% early distribution penalty. However, there are a few conditions in which the government will waive that 10% early retirement penalty. Before I continue, I’d like to make one thing clear.