How not to get penalized when taking money out of your 401k

You generally have to start taking withdrawals from your IRA, SEP IRA, SIMPLE IRA, or retirement plan account when you reach age 70½.

It's called required minimum distribution or RMD.

If you don't take your first RMD during that year, you must take it no later than April 1 of the following year.

If you do put it off until April 1, you must take two distributions in one year.

"You can withdraw more than the RMD," says Financial Adviser Brenda Merschdorf of Edward Jones Financial, "But as the word "required" suggests, you can't withdraw less."

To determine your RMDm  you'll need to use either the Uniform Lifetime Table, which is based on your life expectancy, or the Joint Life Table, if you have a spouse who is the sole beneficiary and who is more than 10 years younger.

Your tax adviser can help you make this selection.

"If you need the extra money, then you'll have to take it," acknowledges Merschdorf. "However, when determining how much you should take beyond your RMDs, you'll need to weigh some other factors. For one thing, if you can delay taking Social Security, you'll get bigger checks, so you might be able to lower the amounts you take from your 401(k) and IRA."

Another factor to consider is the size and composition of your investment portfolio held outside your retirement accounts.

If your employer's retirement plan permits it, you may not have to take RMDs if you are still working and you are 70-1/2 or older.

But, this exception won't apply if you own 5 percent or more of your company.