You can start withdrawing from your 401(k) without penalty at age 59 ½, and you are required to start withdrawals at age 70 ½.
If you choose to take this money out early, you often must pay large penalties and taxes. There are some situations when the 10% early withdrawal penalty is waived, including:
- Excessive medical bills
- Military service
It’s best to research thoroughly and consult a financial advisor before initiating any withdrawal from a retirement account. There are additional exceptions for non-401(k) IRA withdrawals.
403(B) AND OTHER PLANS
Only tax-exempt 501(c)(3) organizations can offer 403(b) plans. So, if you are entering a career as a teacher or school administrator, librarian, researcher, doctor, nurse, clergy or nonprofit professional, you may have a 403(b) as part of your benefits package. 403(b) retirement plans operate similarly to a 401(k). But don’t make any assumptions. Research your specific plan.
If you don’t have a workplace retirement account, you still can invest on your own. Anyone with a job can open an IRA and if you don’t have much to start with, there’s always the option of robo-advisors and microinvesting. However you choose to invest, start as soon as possible and watch out for high management fees. Research expense ratios and average brokerage fees, especially if you get to choose among several brokerage firms.
As always, we’ve got your back. — The On Your Own Team
[Any reference to a specific company, commercial product, process or service does not constitute or imply an endorsement or recommendation by On Your Own, the National Endowment for Financial Education or any of its affiliate programs.]