Question

Chad plans on retiring in March of this year, and he and his wife would like to go to Rome for an extended vacation. He wants to take a distribution of $20,000 from one of his retirement accounts to pay for the vacation. Which of his retirement plans would allow hit to take a penalty-free withdrawal to fund his vacation?

Answer 1

Chad can take a penalty-free withdrawal from his 401(k) retirement account to fund his vacation, but it will be subject to income tax.

Step-by-step explanation:

Chad can take a penalty-free withdrawal from his 401(k) retirement account to fund his vacation. 401(k) plans are defined contribution retirement plans where the employer and employee make contributions to the account, and the funds are invested in various investment options. They offer penalty-free withdrawals for certain qualifying events, such as retirement after reaching a certain age.

By taking a distribution of $20,000 from his 401(k) plan, Chad can use the funds to pay for his vacation without incurring any penalties. However, it is important to note that the distribution will be subject to income tax.