[babygene]

“Penalties to withdraw early are high, up to 40% depending on the person.”

BTW, I believe your 40% number is incorrect... If you are under 59 1/2 the penalty is 10% plus the taxes. Even then if done correctly you can avoid the penalty as long as you withdraw only 10% (could be 8%, I’m not sure) per year. You must withdraw this amount for 5 years though.

[Michaelo]

For some people, including taxes, it would reach 40%. From an ABC News analysis earlier this year:

"Take a $10,000 early withdrawal from a retirement plan, and you could easily lose 40 percent to taxes and penalties, depending upon your tax bracket and where you live.

http://abcnews.go.com/Business/PersonalFinance/story?id=6941661&page=1

[Secret Agent Man]

If you withdraw before 59 1/2 and don’t have one of the several emergency reasons to do so (which waives the penalty), you get a 10% penalty for early withdrawal, and 20% of it is withheld for paying upcoming taxes on the money.

Trust me, I know this.