{"id":3095,"date":"2021-11-01T00:00:00","date_gmt":"2021-11-01T00:00:00","guid":{"rendered":"https:\/\/www.lewiswm.com\/articles\/should-you-make-early-withdrawals-from-your-401k\/"},"modified":"2021-11-01T00:00:00","modified_gmt":"2021-11-01T00:00:00","slug":"should-you-make-early-withdrawals-from-your-401k","status":"publish","type":"oi_article","link":"https:\/\/www.lewiswm.com\/articles\/should-you-make-early-withdrawals-from-your-401k\/","title":{"rendered":"Should You Make Early Withdrawals from Your 401(k)?"},"content":{"rendered":"\n

Your 401(k) is a tax-advantaged retirement account built to help you save more for retirement. Contributions can lower your taxable income, and money inside your 401(k) grows tax-deferred. Withdrawals are subject to income tax. To encourage people to keep money in their 401(k)s until retirement, the IRS may charge a 10% early withdrawal penalty on withdrawals made before age 59 \u00bd.  <\/p>\n\n\n\n

For the most part, it is unwise to withdraw money from your 401(k) before you\u2019re ready to retire. Any funds you take out are money that is no longer working toward your retirement goals. <\/p>\n\n\n\n

On the other hand, sometimes financial necessity or early retirement plans require you to make early withdrawals. To decide when to dip into your 401(k) and when to hold off, you need to consider several factors: the penalties and tax consequences of the withdrawal, the potential tax-advantaged growth you\u2019re giving up, and your individual financial needs. <\/p>\n\n\n\n

Early withdrawal options<\/strong><\/p>\n\n\n\n

The tax code provides for several exceptions to the 10% early withdrawal penalty to accommodate early retirees and people in need. That said, even without the penalty, early withdrawals from your 401(k) can limit your ability to grow your nest egg. That\u2019s why you shouldn\u2019t make them unless absolutely necessary. If you must, here are some options to consider:<\/p>\n\n\n\n