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Ask Lane Your Own Question
Category: Finance
Satisfied Customers: 12009
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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My husband passed away last July & had let his life insurance

Customer Question

my husband passed away last July & had let his life insurance lapse. Will I incure a penalty to remove my 401 as I need the money to try to help me save my house? He was on disability with the Veterans & because I make more than $600 a month I don't qualify to receive his benefits.
Submitted: 2 years ago.
Category: Finance
Expert:  Lane replied 2 years ago.
So sorry, yes, if you are under age 59 an 1/2 you will incur a penalty (IF you pull a lump sum directly from the 401(K)).
However, if you take out money under what are called SEPP payments (Substantially Equal and Periodic Payments)...
I can do this calculation for you
... then the 10% penalty is waived.
Although it may not be a huge lump sum of money ... it would be a way of generating an additional monthly (OR you can can a year's worth out at a time, as long as the amounts from year to year are equal) income without incurring the penalty.
This is done under regulation 72t of the tax code.
Let me know if I can help you with this.
One other thought
Many 401(k)'s have loan provisions. If you loan yourself the money and then spread the repayment (which can be done from your paycheck) back into the 401(k) over 5 years, this could be a way of ...
(1) accessing the money
(2) not having that penalty - or even any additional taxable income and
(3) getting yourself back to a place where you haven't hurt your own retirement just to pull out a hole today.
Please let me know you questions ...
AND whether or not I can help with this ...