You can withdraw from a 401(k) without the 10% early withdrawal penalty once you reach age 59½. Before that, there are several exceptions: leaving your job in or after the year you turn 55, taking equal payments over your life, disability, certain medical bills, a new child, and a few others. Regular income tax still applies to traditional 401(k) money in almost every case.
The basic rules
- After 59½: no penalty. Traditional withdrawals are taxed as income. Roth 401(k) withdrawals are tax-free if the account is at least five years old.
- Before 59½: taxable income plus a 10% penalty, unless an exception applies.
- Still working there? Many plans do not let you withdraw at all while employed, except hardship withdrawals or loans. Check your plan.
Exceptions to the 10% penalty
The rule of 55
If you leave your job, for any reason, in or after the calendar year you turn 55, you can take money from that employer’s 401(k) penalty-free. Some public safety workers in government plans qualify from 50. It does not apply to old 401(k)s from earlier jobs or to IRAs, so do not roll the money out if you plan to use it.
Substantially equal periodic payments (72(t))
You can take a series of equal payments based on your life expectancy, from an IRA or a former employer’s plan, at any age. You must continue them for five years or until 59½, whichever is longer. Breaking the schedule triggers the penalty retroactively, so get help setting it up.
Disability
If you become totally and permanently disabled, withdrawals are penalty-free.
Large medical expenses
You can withdraw penalty-free the amount of unreimbursed medical expenses above 7.5% of your adjusted gross income.
Birth or adoption
Up to $5,000 per child, within a year of the birth or adoption, penalty-free. You can repay it later.
Emergency personal expenses
Since 2024, plans may allow one withdrawal of up to $1,000 a year for an unforeseeable personal or family emergency, penalty-free. You can repay it within three years.
Other exceptions
- Terminal illness
- Withdrawals after a federally declared disaster, up to $22,000
- Victims of domestic abuse, up to a limited amount
- A court order dividing the account in a divorce (QDRO), for the receiving spouse
- An IRS levy on the account
- Death: beneficiaries never pay the 10% penalty
Hardship withdrawals are not penalty-free
Many plans allow hardship withdrawals for things like avoiding eviction, funeral costs or tuition. These let you take the money while still employed, but the 10% penalty and income tax usually still apply unless one of the exceptions above also fits.
A 401(k) loan is another option
Many plans let you borrow up to 50% of your vested balance, to a maximum of $50,000, and repay it through payroll, usually within five years. There is no tax or penalty if you repay on time. The risks: you miss market growth on the borrowed money, and if you leave your job, the loan generally must be repaid by your tax filing deadline or it becomes a taxable withdrawal.
What does an early withdrawal really cost?
Take $20,000 at 40, in the 22% federal bracket with 5% state tax: about $4,400 federal tax, $1,000 state tax and $2,000 penalty, leaving around $12,600. Worse, that $20,000 left invested at 7% for 25 years could have grown to about $108,000. Exhaust other options first: an emergency fund, cutting costs, or a lower-cost loan. Our debt payoff calculator can help if debt is the reason.
Roth 401(k) contributions
For a Roth 401(k), early non-qualified withdrawals include a proportional share of contributions and earnings. The contribution part is tax- and penalty-free; the earnings part is taxable and penalized. This is different from a Roth IRA, where contributions come out first.
Planning to retire early? See the 4% rule and how much you need to retire.
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Frequently asked questions
Can I withdraw from my 401(k) at 55?
Penalty-free only from the plan of the employer you left in or after the year you turned 55. Other 401(k)s and IRAs wait until 59½ unless another exception applies.
Do I pay tax on a 401(k) withdrawal after 59½?
Yes, on traditional 401(k) money, as ordinary income. Qualified Roth 401(k) withdrawals are tax-free.
How much is withheld from a 401(k) withdrawal?
Usually 20% for federal tax on eligible rollover distributions paid to you. Your actual tax can be higher or lower when you file.
This article is general information, not tax advice. Rules and plan features vary, so confirm with your plan and a tax professional.
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