Do you have a 401(k)? If so, you’ll be glad to know that
this is always a smart choice. What’s NOT always a smart choice, however, but
what is sometimes necessary is to make an early withdrawal from your 401(k). If
you have to do this, then you have two basic options.
To start off with, you could use a “distribution,” which is
when you withdraw the funds without any plans of putting them back. A loan, on
the other hand, is when you withdraw the funds but must pay back the loan plus
the interest.
You’ll also, unfortunately, face an early withdrawal penalty
in many cases, as well as taxes, whenever you take money out. However, there
are some exceptions. You can typically avoid the penalty if you:
l Are
over 59.5
l Have
a plan that allows for “hardship distributions” and are able to demonstrate a
real hardship
l Have
a permanent disability
l Leave
work at or after the age of 55
If you don’t meet any of these exceptions, or, even if you
do, you’ll want to think very carefully about whether or not a withdrawal from your 401(k) is really the best option. After all, the goal is to save that
money for retirement.
Every situation is different, though, and you have to make
the choice that’s right for you. Before you do that, though, just make sure you
think and consider all the facts.
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