Thinking of Taking a 401(k) Withdrawal? Here's What It Could Cost You

Withdrawing money from a 401(k) before age 59 1/2 is usually an extremely expensive proposition since you're hit with a 10% tax penalty on your early distribution.

The CARES Act aimed to change that by allowing you to take a penalty-free withdrawal of up to $100,000, or 100% of your vested account balance -- whichever is less. While this special rule applies only to COVID-19 related distributions in 2020, it takes some of the sting out if you have to tap your retirement accounts early.

But just because you won't owe a penalty if you withdraw your money early doesn't mean doing so is cost-free. In fact, there could be a huge price tag associated with raiding your retirement accounts, but you won't pay it now. Your future self will incur the cost when your retirement account balance is much smaller than it could have been.

Source Fool.com