Javascript is not enabled.

Javascript must be enabled to use this site. Please enable Javascript in your browser and try again.

Does My Age Affect Taxes on 401(k) Withdrawals? Ask AARP Tax-Aide Skip to content

From ‘liquid biopsies’ to precision medicine, these five developments will change cancer care in the next decade. Learn more.


Does My Age Affect Taxes on 401(k) Withdrawals?

Q: I was recently laid off and withdrew my 401(k) balance to live on. Do I have to pay a penalty for early withdrawal? I am 58 years old.

 A: Since you were at least 55 years old, in the case of separating from employment, you have been exempt from the 10-percent early withdrawal penalty. Your former employer should place a Code 2 (Known Exception Exists) in Box 7 of the 1099-R that the company will send you. If there is some other code in that box, then you will have to complete IRS Form 5329 and place a Code 01 on Line 2 of that form.

 These questions are actual inquiries submitted by taxpayers to our AARP Tax-Aide Program. The AARP Tax-Aide Program is a volunteer-run, free tax-preparation and assistance program offered to low- and middle-income taxpayers with special attention to people age 60 and older. Our volunteers are trained and IRS-certified to understand individual federal-tax issues. Our volunteers provide tax assistance as a public service and cannot guarantee the accuracy of the information provided.

Join the Discussion

0 | Add Yours

Please leave your comment below.

You must be logged in to leave a comment.