Don’t Take Money Out Prematurely

A 401(k) plan is defined as a long-term retirement plan, therefore, taking money out of it when you’re earning the most is not a good idea.

For one thing, withdrawing money too early will take away your opportunity of compounding and generating additional earning in time and will reduce your retirement nest egg. In addition, using the money from your 401(k) before you turn 59 ½ will incur a 10% early withdrawal penalty on that money as well as an ordinary income tax. This could amount to almost 50% of a taxpayer’s 401(k) withdrawal. Nothing good would result from taking money out before you retire when you really need them for your golden years.