QUESTION:
I have a question as to when I can pull funds out of my solo 401k account without being penalized for it. I know I will have to pay taxes, but I am wondering about the penalties. I am 65 right now and will be 66 in March 2024.
ANSWER:
You are referring to the 10% (ten) early distribution penalty, which only applies if you are under age 59 1/2 at time of the solo 401k distribution.
Once the solo 401k participant reaches age 59 1/2, he or she may make distributions without being subject to the 10% early distribution penalty; however, federal taxes may still apply depending on the sources of solo 401k funds being distributed (e.g., Roth solo 401k vs pretax solo 401k funds with the latter generally not being subject to federal taxes). Also, state taxes may apply to pretax solo 401k distributions depending on your state of residence.
