It’s typically not a good idea to take an early withdrawal from your retirement accounts. It could end up costing you, including income tax and/or a 10% early withdrawal penalty.
Are there any exceptions?
There are some exceptions to IRS rules that allow you to avoid the penalty when taking an early withdrawal from your individual retirement account (IRA), such as using the funds for a qualified higher education expense or toward unreimbursed medical expenses, but those vary widely depending on the kind of account you have, the circumstances, your income bracket and your age.
What about my work retirement plan?
If you have money in an employer-sponsored retirement plan, you usually cannot withdraw money from the plan unless certain events occur, often referred to as distribution “triggering events.” These triggering events vary between plans, depending upon the type of plan and the choices made by the employer.
Sometimes separation of employment constitutes a triggering event, but even then, there still may be a waiting period before you can take your money out. Some plans will allow you to move your money to another retirement plan or to an IRA upon termination of employment.
Talk to the plan administrator (most likely your employer) for details regarding distributions or review the plan’s summary plan description.
The advice provided is for informational purposes only. Contact a financial advisor for additional guidance.