Your 401(k) When Switching Jobs
- Introduction
- Income Tax Considerations
- Beware–the 10% Early Withdrawal Penalty Tax
- Rollover into a Traditional IRA or Other Retirement Plan
- Conduit IRAs
- Summary of Distribution Options When You Leave Your Company
Beware–the 10% Early Withdrawal Penalty Tax
401(k) plans allow you to begin withdrawing money, without penalty, after age 59½. However, there is a 10% penalty tax on withdrawals made before age 59½ (if you don't roll it over) from your 401(k) plan, unless the distribution is made under one of the limited circumstances allowed by law. That is, there is a penalty for taking your money "too soon."
Some Exceptions to the 10% Early Withdrawal Penalty for 401(k) Plans
The 10% early withdrawal penalty does not apply to these situations:
- Distributions made after age 59½
- Distributions made after you separate from service during or after the year in which you reach age 55
- Distributions that you roll over to another qualified retirement plan, tax-sheltered annuity, or IRA within 60 days.
- Distributions made due to disability or after your death
- Distributions for qualified medical expenses that exceed 10% of adjusted gross income in 2019 (7.5% in 2018).
- Distributions after separation from service that are part of a scheduled series of substantially equal periodic payments
IMPORTANT NOTE: Using your retirement plan savings for non-retirement purposes should always be your last resort.
For more information, see the section Distributions Over Your Life Expectancy.
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Important information about procedures for opening a new account
To help the government fight the funding of Terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account.
What this means to you: When you open an account, we will ask you for your name, address, date of birth and other information that will allow us to identify you. We may also ask to see your driver's license or other identifying documents.
Investment products are offered through Osaic Institutions, Inc., Member FINRA/SIPC. Insurance products offered through Osaic Institutions, Inc.