10% Penalty Quiz

Is it possible to elaborate on the 10% penalty quiz’s answers (quiz was posted on the Ed Slott daily email from July 31 2017 at 7:06 AM PDT) ? I am not sure as to why you can not use 401(k) funds to pay for education expenses without incurring the penalty.



There are some differences in the penalty provisions between qualified plans and IRAs with several exceptions that apply for one and not the other. As to “why” they are different, basically the qualified plan exceptions tend to be work related (age 55, QDROs etc) and the IRA exceptions more personal life related (education, first home etc). Some exceptions such as age 59.5, death, and disability apply to both. Here is the current IRS penalty exception chart: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions



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