An early withdrawal from our 401k plan was used to buy a home. This is valid to withdraw funds. Can we avoid the 10% penalty for this reason which isn't listed?

We took money out of our 401(k) plan to purchase a home and I don't think we should be penalized to pay the 10% penalty of $4,500. Any way around this?

posted

No. There is absolutely no way around that. The exception to the early withdrawal penalty for a first time home purchase applies only to an IRA withdrawal. It does not apply to a 401k withdrawal for that purpose. What your fund allows as a reason for withdrawal is totally different than what the IRS allows as an exception to the penalty for early withdrawal.