This loophole lets you withdraw early from your 401(k), but should you?

The Internal Revenue Service has a rule that states individuals can withdraw from a 401(k) plan if they’ve retired, quit or been fired at 55 years old — that doesn’t necessarily mean they should take it.

Retirement plan participants cannot begin withdrawing assets from their 401(k) plans until they reach 59 ½ years old, or they become disabled. Doing so beforehand would incur a 10% penalty, on top of the taxes that individuals pay regardless when they withdraw. But with the so-called rule of 55, employees who have been separated from service during or after the year they turn 55 can withdraw money penalty-free from a qualified plan.

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