When Is A 401k Distribution Not Subject To The 10% Penalty?
There are only a couple of situations where the IRS will waive the 10% early withdrawal penalty.
- Your un-reimbursed medical costs exceeds 7.5% of your income and you made the withdrawal to pay for these expenses.
- There is a Qualified domestic Relations Order (QDRO) from the courts that mandate funds from your account go to a former spouse, child, or dependent.
- You have separated from service and were at least 55 years of age when you did so (or separated from service in the year in which you turned 55).
- You have elect a Section 72(t) distribution.
- You are totally disabled. (The key to the disability exception seems to lie in the permanence of the condition, not the severity. Therefore, to claim this exemption you have to furnish not only information proving that you are totally disabled, but also information on the permanence of the disability.)
- You have died and your beneficiary gets the money.
You should also consider taking a loan or hardship withdrawal from your plan.
