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Penalty - It is your money

Posted: Feb 9th, 2023 - 2:05 pm In Reply to: Anyone with 401K or IRA care to share their - experience

It is 10% plus being taxed by the IRS at your regular rate, so with 100K you are paying a 10K penalty plus income tax. You could be looking at forfeiting 20% of your principal depending on your tax bracket. I had a 401K rollover but didn't take it in a lump sum. I re-invested most of it and my advisor set up a "cash account" so that I could take distributions for emergencies. I also think there are ways to set up automatic payments to get money each month, and you will also have what you collect from SS. I don't know of any downside, it's your money and you can use it as you need or want. If you know of someone where you bank, you can meet with them to discuss your goals and it's usually free of charge. It is good to have a budget for monthly expenses and other needs, those funds have to last a long time. You can take my advice or not, but I would recommend against taking it in a lump sum. If you do a direct rollover you won't get hit with penalties or tax and you'll make additional money from your investment account. I didn't retire early, but it still applies.


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