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When it comes to 401K withdrawals- just say no! Step away from the 401K account and find money somewhere else. You will find that taking money out have severe penalties — not just the 10% that you hear about but also federal income taxes and state income taxes too (depending on the state that you live in.  So don’t do it.

Here is an example: Sally lives in California and is 55 years old and takes $10,000 out of her 401k. Sally pays:

Federal 10% penalty tax-$1,000

CA state 2.5% penalty tax-$250

Federal income tax(28% bracket) $2200

State income tax (9% bracket) $1000

Do you think Sally made a wise decision?

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