Expert: Ed McFarland - 8/10/2006

Question
Hi Ed,
I know that we don't have to pay the 10% penalty if we take the 401K money to pay for the medical expense.  

I know there are other reasons which we don't have to pay 10% penalty if we spend 401K money before the age of 59 1/2.  I don't know which ones so please provide the information.  

Thanks
Jimmy

Answer
The most common is a 72t distribution. It allows a participant to get distributions before 59 1/2.

For your plan there could be loan provisions.

Check with the plan sponsor and look at your plan summary, it explains how the plan works.

Realize that the plan is set up for retirement and is not a savings account, so there are few ways to avoid the penalty and regardless of that, you will pay federal and state income taxes.

Good luck