Generally, certificate of deposits and 401k plans are bound by certain parameters that make them less accessible than others. For both certificates of deposits and 401k plans, strong penalties will be applied should the funds held in these accounts be accessed before predetermined dates. However, in some instances these penalties will be waived.
A certificate of deposit, more commonly referred to as a CD, is defined by a time limit. There are short-term CDs, medium-term CDs, and long-term CDs. By definition, the holder of the CD cannot access profits from the CD until it has reached its maturity date. By accessing the money before the maturity date, the holder will be penalized, thus most of the money earn in interest will be lost. However, the financial institution holding the CD account may waive penalties if you really need the money in your CD due to accident, illness, or other major life event.
Like the CD, 401k plans are not meant to be accessed until a specified time; which is after 59 and a half years. If money in the 401k is touched before the allowed date, that person will be heavily taxed. However, also like the CD, 401k plans have exceptions for those that can prove of intense hardship – such as illness or disability; in which that person will be waived of any penalties.
To learn more about waiving CD and 401k penalties, be sure to consult with a financial advisor or a representative from your employer’s human resources department. They can help you understand how these investments work, so that you don’t end up losing money.