There are a number of reasons why it might be tempting to cash out your hard-earned 401k savings before retirement. From hefty car or home repairs to emergency medical expenses, sometimes unexpected circumstances cause us to seek out extra cash. In fact, 1 in 3 people have resorted to a 401k early withdrawal, often when in between jobs.
However, it’s important that you’re aware of any penalties and fees before you choose to withdraw. Additionally, 401k early withdrawals may have unwanted impacts on your taxes. Read on to learn exactly what happens when you decide to dip into your 401k so you won’t be surprised by any repercussions.
What Happens When You Make a 401k Early Withdrawal
A normal, penalty-free 401k withdrawal occurs after retirement or after you’ve reached the age of 59½. The funds are subject to income tax just like your paycheck previously was. However, if…