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This can provide a nice cash cushion, though you do lose a bit of tax-deferral benefit on any amounts you take as income.There is one significant trap that may affect the unemployed, however: Any withdrawals you take from a 401k plan could offset unemployment compensation.You may not feel like purchasing a home while you’re unemployed.

It’s tempting to look at that 401k plan you amassed over the years at your last employer as nice cash cushion while you get back on your feet and figure out what to do.If you do choose to roll it over, I recommend executing a trustee-to-trustee transfer.You can have the 401k plan send you a check directly, but then the clock is ticking. If you screw up, you will pay taxes and penalties on the whole thing at once.You cannot try it from your 401k, or you will run into the 20 percent withholding and 10 percent penalty issue.Section 72(t) allows you to avoid the 10 percent penalty by spreading your income from your 401k over the rest of your life expectancy.

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