Ask Money

401(k) withdrawals

Chris Farrell Apr 23, 2009

Question: Has the law been changed to allow employees vested under an employer pension plan (401K) to withdraw up to $10,000 without penalty? I am 51 years of age and I have been working for the same company for 28 years. Thank you for your attention and your time. Madeline, Miami, FL

Answer: No, the rules weren’t changed. The proposal to allow for penalty-free withdrawal from a 401(k)-type retirement savings plan was one of many options debated in the weeks leading up to the fiscal stimulus package. It never really gained traction. Since you’re under 59 ½ you would pay a 10% penalty of the withdrawal, plus ordinary income taxes–a big hit to savings.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.