When making an early withdraw, partial or full , no tax or fees when withdrawing from 401k. Withdrawing from 401k should be a last resort but for some people it can be emergency funds.
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I agree. It’s our money, we shouldn’t be penalized.
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If there were no income tax it wouldnt matter if workers are allowed to borrow from 401k
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Agree. Yes, it should be an emergency fund only but the limited reasons to use without penalty are currently too narrow. It does not include for rent or food. Primarily to only non-penalty reason is for health/medical reasons.
It should not be to purchase a new car.
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You can get a loan from your 401k now for a new car. You pay your loan back monthly and you pay yourself interest.
The 401K is a great savings vehicle and does have some flexibility as it stands.
Maybe it is the way the funds are used. You mentioned it as a “loan”, which may be considered differently than an “early withdrawal”.
Maybe the IRS views the “loan” as not touching your hands so early penalty tax won’t apply?
What state are you in? I’m not familiar with this in California.