Retirement withdrawals were up to 7% in 2010, a 2% increase from 2005. And in the same period, the number of outstanding loans from 401(k) participants rose 6%, from 22% to 28%.

Since unemployment rose during the economic recession, some people had no choice but to raid their retirement funds. But doing it willy-nilly can add up to serious fines and debt later.

As a general rule, when one dips into retirement before age 59 ½, on top of income taxes there will also be a 10% penalty for withdrawing early.

But not always. There are exceptions to this, and with careful research and planning, the 10% penalty can be avoided altogether.

First, there are some situations that are simply out of your control.  For example, if you become permanently disabled, require money for medical expenses, or have an IRS levy, there will usually be no penalty for withdrawing from an IRA or 401(k) early.

Additionally, IRAs allow withdrawals for the unemployed to pay for health insurance, to buy a first home, or to pay for college.

But some retirement plans also allow you, with careful planning, to receive yearly withdrawals in what are called “substantially equal periodic payments.”

This means that, on a very basic level, you can come with a payment plan to receive periodically according to the amount in your retirement plan and your life expectancy (determined according to age).

The catch is that you can’t stop the withdrawals once you set them up, and you will receive them for either 5 years or until age 59 ½.

But this plan allows you to avoid the 10% penalty. Of course, you should certainly research your own retirement plan or plans before jumping into this, just to be sure the risks aren’t greater than the benefit.

Another way to begin receiving payments early from a 401(k) is if you leave the company at age 55. You would still pay income tax, but the penalty could be avoided. But this option is very austere about the age restriction of 55. You can’t be any younger when you leave the company, or the penalty will become applicable.

You can also avoid penalties with an ESOP, or employee stock ownership plan. They use employer stocks to fund the plan, and the employee can receive payments at any time without a fee.

And another way to withdraw early is through QDRO, or Qualified Domestic Relations Order, payments. 

This applies only to people paying alimony or child support. But it allows people to withdraw early without penalty so long as some or all of the payment is going to a former spouse for one of those purposes.

Again, make sure to look into your specific plans before taking action to withdraw, particularly if you have more than one. Research can be your best friend when you’re looking to owe as little as possible.

Gil Charney of H&R Block stresses the importance of getting all the facts:

“It can be very confusing, and in some cases we’re talking about pretty big dollars.  Sometimes it’s better to take a distribution from an IRA where a penalty exemption exists than thinking broadly that the penalty exception will exist for the 401(k) when it doesn’t.”

So if you’re looking to withdraw from your retirement fund, consider whether any of these options apply to you, and then look at your own plans.

Of course, it’s better to avoid withdrawal altogether if you can. But sometimes you simply need the cash...