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In addition, you will be liable to pay the remainder of any income tax due by April 15th of the year following the tax year in which you make the withdrawal.Unless you are age 55 or older, you will also need to pay a 10 percent early distribution penalty.It would take some significant tax planning to split the tax hit.

IRAs, or Individual Retirement Accounts, offer a similar list of hardship exceptions to the 10 percent penalty, but with two notable advantages: With IRAs, you can also make penalty free withdrawals to cover college expenses, and to purchase a home.You may not feel like purchasing a home while you’re unemployed.But if you were sitting on the fence about going back to school and you have the money, you won’t pay a penalty if you tap an IRA to do so.Worse yet, this additional 10 percent is calculated based on the entire withdrawal – not just what you receive after taxes.So you will have to pay part of that penalty on money you never receive. This provision applies to those over 55 who have left their company.

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