I am disabled since 6/07, had a 401K, made the medical withdrawal; I thought I withdrew all funds, just received the 401K statement of 989.00 balance, please help me.

[Superich5100]

I am confused what to do because before I disabled my problem is I swear I emptied the account. I even looked for money for almost five years because of my situation, and I needed a car for medical needs. I could find no funds at all.

My problem is I have no frame of reference for this and

do not know if you can have retirement savings on 100 percent disability. I filled with TurboTax every single year, and I purchased the audit the defense. That seems to not be of any help for answers either.

I just need a direction if any people can guide me so that I can fix my problem before the sixty days expires. That is a problem as well in that I am trying to figure out what else to do with the money if I can not roll it over into another 401 K as a disabled person.

The other things that I am pretty sure there would be no penalty on are I have extensive medical expenses and student loans. I think that by making a withdrawal and paying those debts. I believe there is not tax penalty as long as I document the proper allocation of the funds?

Thank you so much for all of you taking the time to read my tax question, and I appreciate so very much in advance.

Thank you so very much,

R E

[MichaelDC · Accepted solution]

You won't have a penalty because of the disability exception: Disability (per IRS) means that you have been examined by a physician and the disability is such that you cannot work, and the condition is expected to last for at least one year or result in your death. IRS 72(t)(2)(A)(iii)

Next, the fact that you have a $989.00 balance in your 401k doesn't necessarily mean you have a taxable distribution in 2016. Normally, you would have received a Form 1099-R if you had a distribution to report.

Also, the fact that you have retirement savings will not affect your disability benefits.

If you have any other details regarding this question, please feel free to post them in the comment section.