Early Withdrawal From 401k Exceptions

November 28th, 2005

Question: Question Regarding How to Assess 10% Penalty on Early 401k Withdrawal?

I am younger than age 59 ½ but had to take an Early Withdrawal from a 401(k) plan in 2009 due to financial difficulties. I am trying to figure out how much of the withdrawal is subject to the 10% penalty associated with Early Withdrawal. Does the following statement from the IRS website (which lists one of the exceptions related to assessing the 10% penalty) mean I can exclude all of my withdrawal from the 10% penalty, or does it mean I can exclude only the amount by which I am over the 7.5% threshold for deductible medical expenses?

” . . . Distributions that are equal to or less than your deductible medical expenses, that is, the amount of your medical expenses that is more than 7.5% of your adjusted gross income. You do not have to itemize to meet this exception. For more information on medical expenses, refer to Topic 502″

Answer: Exclude only the amount OVER 7.5%

401k Distributions