30 Seconds to Know

When you can tap into your 401(k) early — without a penalty!

Despite what you may have heard, you won't always be fined for tapping into your retirement fund early.

In a perfect world, all of the money that you stash away in your retirement fund wouldn't be touched until you are 59 1/2 years old. But things don’t always go as planned — unexpected events and opportunities arise.

If you decide to do an early retirement withdrawal before you turn 59 1/2, the rule is that you’ll be hit with a whopping 10 percent early distribution penalty. But TODAY financial editor Jean Chatzky shared her knowledge on the exceptions to that rule, and how you can avoid getting a penalty.

RELATED: How to invest for a comfortable retirement: 6 tips to manage stocks, IRAs, more

Here are some of the cases with an exception:

  • If you have a 401(k) plan and need to access it because of severe circumstance — such as death, permanent disability or medical bills that haven't been reimbursed (totaling more than 10 percent of your income) — you won't be penalized.
  • IRAs, on the other hand, allow you to withdraw retirement savings for all of the same severe circumstances as the 401(k) plan does — in addition to a couple of other unique situations.
  • Limited withdrawals from your IRA are permitted in circumstances such as qualified home purchases, education expenses and health insurance premiums while you are unemployed.
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