Tapping a 401(k) Early

Q. I was laid off a few months back and want to know if I can tap into my 401(k) to help pay my mortgage, utilities and other bills.

A. Yes, but it would be wise to consider other options first, such as withdrawing money from a bank savings account or cashing in an investment.

That said, it's possible to withdraw as much from your 401(k) as you want — but if you're younger than 59 1/2 you have to pay a 10 percent penalty and regular income taxes on that amount.

So if you're below that age, see whether you might qualify for a hardship withdrawal to avoid paying the penalty (you'd still be liable for the taxes). Certain medical expenses, as well as mortgage payments to prevent foreclosure of a primary residence, are among the potential qualifications.

If you also have an IRA, are unclear about your job prospects and are younger than 59 1/2, look into what's known as a 72(t) withdrawal. This would allow you to take out equal amounts of money for five years or until you reach 59 1/2, whichever is longer. This route avoids the 10 percent penalty.

If you're confident you'll be returning to work shortly, Mike Savage of the Savage Financial Group in East Stroudsburg, Pa., says you can also make a tax-free, penalty-free withdrawal from your IRA if you replace the money within 60 days.

Carole Fleck is a senior editor at the AARP Bulletin.