Your Money Question: Tap your 401(k) for health insurance?

Q.If I retire before age 59½, can I use funds from a 401(k) plan to pay healthcare costs and health insurance premiums without triggering a 10 percent penalty?

A. Only under certain circumstances. An exception to the penalty tax specifically covers distributions used to pay medical care expenses deductible on your tax return (regardless of whether you actually itemize your deductions), but it applies only to expenses that exceed 7.5 percent of your adjusted gross income. Two other exceptions may prove useful to you: First, if you'll be at least 55 in the year you retire and you're an employee (not a sole proprietor or a partner), you can take penalty-free withdrawals for any reason, including to pay for insurance premiums or medical expenses. Second, even if you'll be younger than 55 you can avoid the penalty by taking roughly equal periodic payments, based on your life expectancy (or yours and a beneficiary's jointly). But you'd have to continue taking the payments for at least five years or until you turn 59½—whichever period is longer—unless you die or become disabled