How To Crack Into Your Nest Egg Early

401(k)s allow penalty-free withdrawals at younger ages than IRAs

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Retirement accounts are generally intended to finance life after you leave the workforce. When you crack into your nest egg before retirement you rob yourself of tax-deferred growth. But if you do need to access to your retirement stash before age 59 ½, there are a variety of ways to avoid paying an early withdrawal penalty. Medical bills, a first home, and even college tuition are among the Uncle Sam approved ways to spend your IRA balance.

[Check out these 7 Penalty-Free Ways to Tap Your IRA Before Retirement.]

The type of retirement account also plays a role. Retirees can begin taking penalty-free 401(k) withdrawals at age 55. “If you work up to your 55th birthday and then leave you can take the money out of a 401(k) [without penalty],” says Mary Rowland, author of The New Commonsense Guide to Your 401(k): Rebuilding Your Portfolio from the Bottom Up. But if you roll your nest egg into an IRA you’ll need to wait until age 59 ½ to take IRA distributions without the usual 10 percent early withdrawal penalty.

[See Rethinking 401(k) Rollovers.]