Your 401(k) When Switching Jobs

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:

  1. Distributions made after age 59½
  2. Distributions made after you separate from service during or after the year in which you reach age 55
  3. Distributions that you roll over to another qualified retirement plan, tax-sheltered annuity, or IRA within 60 days.
  4. Distributions made due to disability or after your death
  5. Distributions for qualified medical expenses that exceed 10% (7.5% age 65 or older) of adjusted gross income
  6. 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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*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. ("CFS"), a Registered Broker-dealer (Member FINRA/SIPC) and SEC-registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. General Electric Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.

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