401(K) Withdrawal
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New Member

401(K) Withdrawal

After 21 years of working for the same company, I quit in late Feb. of this yr. (2020).  And then COVID hit.  Due to COVID wrecking the economy, I have been unable to find work for approx. 8 months.  I am 40-years-old and unable to receive Unemployment Compensation Benefits.  My question is this - Am I able to withdrawal money from my 401(K) account WITHOUT incurring a 10% penalty?  I have read mixed answers.  Many thanks!

3 Replies
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Level 15

401(K) Withdrawal

Yes, you can withdraw from a 401(k) account without penalty if you have been affected by the Coronavirus.

 

Go to this IRS website for Coronavirus-related relief Q&A's - https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-...

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New Member

401(K) Withdrawal

I think you are wrong about that.  I need an expert to chime in here, please.  I thought I could only withdrawal money w/o penalty, if I was laid-off or furloughed.  Neither of those apply to me.

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Level 15

401(K) Withdrawal


@1QuickQuestion wrote:

I think you are wrong about that.  I need an expert to chime in here, please.  I thought I could only withdrawal money w/o penalty, if I was laid-off or furloughed.  Neither of those apply to me.


From the IRS website - https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-...

 

You are a qualified individual if any of these situations apply to you:

 

  • You are diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention;
  • Your spouse or dependent is diagnosed with SARS-CoV-2 or with COVID-19 by a test approved by the Centers for Disease Control and Prevention;
  • You experience adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to SARS-CoV-2 or COVID-19;
  • You experience adverse financial consequences as a result of being unable to work due to lack of child care due to SARS-CoV-2 or COVID-19; or
  • You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19.

If none of those situations apply in your circumstances then you are not a qualified individual and the CARES act does not apply to you.

An early withdrawal from a 401(k) will incur a 10% penalty on your 2020 federal tax return.

 

Also see this IRS Notice 2020-50 - Guidance for Coronavirus-Related Distributions and Loans from
Retirement Plans Under the CARES Act - https://www.irs.gov/pub/irs-drop/n-20-50.pdf

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