If you have been contributing to a company-sponsored retirement plans, such as a 401k plan or 403b plan, you may be hoping to tap into it when you are terminated from your job at age 55. If this happens, an exception to early withdrawal rules permits you to take out the money out of the account without paying an early-withdrawal penalty if you retire. However, you will still be responsible for paying income taxes on the withdrawal.
Request a distribution from your 401k or 403b plan by contacting your plan administrator. Typically you will have to fill out a distribution request form to get your money out of the account, and the money will be paid to you.
Complete Form 5329 to document the amount of your withdrawal and write "01" as the code next to line 2. This exempts your distribution from the 10 percent early-withdrawal penalty.
Report the amount of your distribution on line 16b of Form 1040. This amount counts as taxable income.
Report the amount of federal income tax withholding, found in box 4 of your Form 1099-R that you receive at the end of the year, on line 61 of your Form 1040. This will reduce your tax liability.
IRAs do not offer the same early withdrawal exceptions as 401k and 403b plans. Even if you are terminated, you must still wait until age 59 1/2 to withdraw IRA money without an early-withdrawal penalty.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."