Sign up for our monthly Lifestyle newsletter for entertainment news, healthy living tips and more.
by AARP.org, AARP en Nuevo México, August 25, 2008
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: As you separated from employment and are at least age 55, you are exempt from the 10 percent early-withdrawal penalty. Your former employer should record a Code 2 (Known Exception Exists) in Box 7 of the 1099-R that will be sent to you. If there is some other code in that box, then you will have to complete IRS Form 5329 and write 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 those 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.
Please leave your comment below.
You must be logged in to leave a comment.
Up to 25% off device and online privacy protection plans
Help from experts & resources to get started
No-fee personal loans
AARP members receive exclusive member benefits & affect social change.
You are leaving AARP.org and going to the website of our trusted provider. The provider’s terms, conditions and policies apply. Please return to AARP.org to learn more about other benefits.
Your email address is now confirmed.
You'll start receiving the latest news, benefits, events, and programs related to AARP's mission to empower people to choose how they live as they age.
You can also manage your communication preferences by updating your account at anytime. You will be asked to register or log in.
In the next 24 hours, you will receive an email to confirm your subscription to receive emails
related to AARP volunteering. Once you confirm that subscription, you will regularly
receive communications related to AARP volunteering. In the meantime, please feel free
to search for ways to make a difference in your community at