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Basically you are deferring paying the tax on the money invested in your 401k until you are 62.5 years old i believe. The money was taken from a paycheck pre-tax so the tax is paid as you withdraw it. If you take it early, there will be a 20% federal tax and a 10% penalty taken also. For proper advice, start with your 401k plan Document that is provided by your employer. Then an accountant if you are unsure.
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