I want to retire before age 59. How do I avoid the 10% early distribution penalty on retirement payments from my 401k?
If you want to retire before age 59 and begin taking distributions from your 401k plan, you will generally be subject to a 10% early distribution penalty. The early distribution penalty is the cornerstone of the government’s campaign to discourage us from plundering our savings before our golden years. Of course, with the strong markets, many of us are able to retire before 59 and we would like to begin getting at our nest egg to do so. Luckily, there are a couple of ways to do this without paying the 10% penalty. Leaving Your Job On or After Age 55 If you are retiring from the company that is sponsoring your plan and you are at least 55 at retirement, you can begin to withdraw monthly income from your 401k with no penalty. You will owe income tax on the amount. You will need to check with your companies benefits administrator for details. Your employer is also required to give you a “Summary Plan Description” (SPD) annually and upon request. The SPD should also address early retiremen
