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In a cash crunch? Penalty-free retirement account withdrawals could help

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If you’re facing a cash shortfall, you may consider taking an early withdrawal from your individual retirement account or qualified retirement plan account. By early withdrawal, I mean one that occurs before age 59½. Needless to say, there are tax implications, including the possibility of getting socked with the dreaded 10% early withdrawal penalty tax. Thankfully, there are exceptions to the penalty. Here’s what you need to know.

In most cases, all or part of any withdrawal from a traditional IRA or qualified plan, such as a company-sponsored 401(k) or profit-sharing plan, counts as taxable income. The taxable percentage depends on whether you’ve made any nondeductible contributions to the account.

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