Suppose you have a 401(k) plan, and you would like to draw the money out when you are age 45. You want the money to send your child to college. What will happen if you draw all the money out and close the account?

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If you withdraw money from your 401(k) plan before you reach age 59½, you will usually have to pay a 10% tax penalty in addition to regular income tax on the amount withdrawn. Therefore, if you withdraw all the money from your 401(k) plan to send your child to college when you are only 45, you will have to pay income taxes, plus a 10% tax penalty on the amount withdrawn. It is generally not recommended to withdraw all funds from a retirement account early unless it is a last resort, as this can significantly reduce your retirement savings and limit your ability to compound earnings.

Suppose You Have a 401(k) Plan, and You Would Like