While every retirement plan has similar early withdrawal penalty exemptions, they are not all the same. Being aware of these slight differences within 401(k) plans can help you get around a 10 percent tax penalty if you withdraw funds from the plan before reaching age 59 1/2. This is the case because a basic rollover of funds into a Traditional IRA is a readily available option to avoid the penalty. You should consider rolling over your 401(k) into an IRA prior to early distribution when:
Remember, by rolling the funds prior to pulling the funds for pre-retirement distribution you are avoiding the early withdrawal penalties, but you must still pay the applicable income tax.
Bonus Retirement Plan Tips
Two other quirks in the retirement tax code to be aware of: