When Can I Take Money Out Of My 401k?

5474683106_59de2581d3A common question that many Americans ask is ‘when can I take money out of my 401k?’  It’s not only a question that people approaching retirement ask but also a query raised by increasing numbers of cash strapped workers.

The simple answer to the question ‘when can I take money out of my 401k?’ is ‘at any time’.  However, if you’re under the age of 59 ½ then you may end up paying penalties.  Keep reading to find out the consequences if you want to withdraw from your 401k plan.

Taking money out of your 401k on retirement

The standard age for taking cash out of your 401k plan is 59 ½.  So, if you are over that age then you can take your money out as dispersals and you’ll just pay standard income tax.

When you can take money out of your 401k early without penalty

There are other situations where you can withdraw cash from your 401k plan before the age of 59 ½ without paying a penalty. Such situations include:

  • You become permanently disabled
  • You die and the account is paid to your beneficiary/estate
  • You make an allowable medical expense deduction (where your medical expenses exceed 7.5 per cent of your adjusted gross income)
  • You’re separated from service (through permanent layoff, termination, quitting or taking early retirement) in the year you turned 55 or later
  • You have to pay a levy on the 401k plan itself

In these instances the normal income tax rules apply, but you won’t pay a penalty.

Taking money out of your 401k at other times

If you’re under the age of 59 ½ and you want to take money out of your 401k plan for any other reason, you will generally pay a 10% withdrawal penalty in addition to any income tax that is applicable.

CNN reports that ‘David Wray, president of the Profit Sharing/401(k) Council of America, said that people making hardship withdrawals could pay a penalty of up to 40 per cent, once state and federal taxes are added to the 10 per cent penalty.’

Other factors to consider if you want to take money out of a 401k

As well as the potential tax and penalty implications, there are other factors you should take into account before you take money out of your 401k.

Firstly, withdrawing money means that you will be sacrificing the benefit of an earlier 401k plan contribution and you will lose all the potential future investment growth of the money you withdraw.

Secondly, you can’t make up these contributions at a later date and so you may find you receive a smaller income in retirement than you had planned for.  Finally, you will also be giving up excellent tax benefits (your contribution is tax deductible and the growth of your account is tax deferred).

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5 + = thirteen

Total 74 comments are posted
  1. So, if I want to withdraw some money from my 401k now (I am aged 38), I’ll have to pay the 10% penalty and any taxes that are due?

    Posted by : Corey J
  2. Corey – Thanks for your question. Yes, you will pay the 10% penalty and all taxes UNLESS your withdrawal is for one of the five reasons highlighted above (you’re permanently disabled etc).

    Posted by : admin
  3. hi i have 4998.49 in my 401 k and i want to take out two grand due to hardships in family and im 33 and live in ny how much will i be paying back for taking that out?

    Posted by : halena
  4. What age can I cash in my 401 K with out paying any penalties, and taxes?

    Posted by : Cristina
  5. my husband is 60 and it looks like it will take about a year to get on SSDisability, what will it cost us in Missouri to withdraw money to help get us through that year.

    Posted by : nanax6babys
  6. I need to cash out 2 small 401′s from companies I was laid-off from and I am 57, will I have to pay a penalty? It is going to the purchase of a retirement home.

    Posted by : Claire
  7. I will be taking over caring for my 5 grandchildren and need the money from my 401k to start that … they will be coming from a different state and when I asked about taking the money I was told that was not a hardship and that I could not take it. Is this true?

    Posted by : Tracy
  8. Halena, I’m not the admin but I can answer your question. My understanding is you can take a loan from your 401k equal to half of the present balance. You won’t have to pay a penalty but you will have to pay the money back. Payback is ususally over 5 years and is handled through payroll deduction. Hope this helps.

    Posted by : Terry
  9. I am going to be 55 i want to retire @ 55 can i cash out my 401 without penalty my 401k is not from the company. That i will retire from.

    Posted by : frankie
  10. I plan to retire at 55 after 25 years of service with my current employer. I believe as long as I wait until 55 or later and retire from the company holding the plan I can take withdrawels with no penalties. Is this correct?

    Posted by : Donna
  11. i am 50 yrs old- my company is getting away w/401 k plan- i have 147,000.00 in my account – how much penalty and tax do i have to pay if i withdraw now

    Posted by : roger
  12. My question is who put the penalty in place and why? We all know the anwer to this dont we?

    Posted by : rick
  13. My 401K plan said I can not take a withdrawl for any reason unless it meets the hardship requirements, and then I would be taxed with the penalties. They said there is no way to remove funds from a 401K unless it’s a loan, hardwhip withdrawl or you leave employment with the company.
    And, they said even if my home is in forclosure, they can insist that I try to refinance first. You have to exhaust every other method of loans. I find it hard to believe that if it’s my money I can’t take it, even if I know the penalties. Can they do this?

    Posted by : Selena
  14. I have almost 2000 in my 401k I am only 26 but I need to catch up on bills and my work is on lack of work right now so we are only doing 32 hours a week…. Can I get 1500 out of my 401 and how would I? Also, when they take that % out do they take it out of the money you are taking out or what is remaining? And I just filed bankruptcy and still waiting on being discharged will that affect anything???

    Posted by : Elizabeth
  15. There are several questions to ask before determining if a pre-retirement distribution is allowed. If you are still working for the company that sponsors your plan, your options are limited to what’s stated in the Plan Document. Not every plan allows loans, hardship withdrawals or distributions prior to age 59.5. Please consult your Summary Plan Description, your Benefits Administrator, or simply call the Customer Service number printed on your statements.

    Posted by : Sheray Oliver
  16. My husband will be 70 1/2 December 2012. He received forms on making his minimal withdrawal from a 401K plan. He is considering withdrawing it all, having at least 12% taxes withheld. Is there a tax rate benefit withdrawing in this year of 2012 vs 2013?

    Posted by : Sheray OliverMarie
  17. Why is it called a 401k, not a 401 A?

    Posted by : kim
  18. Hello, I am 33 yrs old, live in Texas and not currently working, but going to a private school. I would like to take money out from my 401K to help me until I am done with school. I have read that I would have to pay income tax plus 10% back. When and how is this money paid back? Thanks!

    Posted by : Daisy
  19. Where can I find info on what an “allowable” medical expense entails?

    Posted by : aubrey
  20. Do I have to pay the additional 10% tax penalty if the company was sold, and the new owners are not offering 401k?? I dont want to rollover to another plan just cash out and I am 57 years old, is this the same as the no penalty on age 55 for retirement, (which I am not doing). Will I just pay taxes on this as additional income??

    Posted by : Christine
  21. Halena,

    I have taken a couple of 401k loans due to hardship. I have paid off one so far, with interest but no penalty.

    Posted by : helen
  22. I am getting separated from my husband and giving me half of the 401K is in our separation agreement. Does this mean there is still a penalty?

    Posted by : Lisa
  23. i am 58 and want to take my 401k how much penalty do i have to pay

    Posted by : rita
  24. My husband just got laid off. He is 55. Can we take the money out now without paying a penalty

    Posted by : Donna
  25. I have $3000 in my 401k. I took a loan for $1300 before applying for a hardship withdrawal. Now I am eligible for the remaining $1700 through the hardship the company is telling me I can not take the remaining balance. This was after they received all my documents to prove I am buying a home. Do some companies restrict the withdrawal through hardship even after having you take a loan first? And if not how do I dispute their late claim?

    Posted by : Ebony
  26. Im so sorry to hear about your hardships ….NOT!U wait till ur 60 or take the withdrawal from ur 401 k with huge penalties. ….The penalty fees go to my account 😉 ….insurance agent

    Posted by : Bobby
  27. I am on L1 Visa and would be working in US for 2 years. Once I return back from USA, would I be able to withdraw 401K amount? If so what would be the penalties?

    Posted by : Raj
  28. I have $8,000+ in my 401 k I am recently facing some financial hardships . I thought I could take it all or some of it out , but my office manager told me I cant until 59 1/2 yrs of age !!! I KNOW I WILL TAKE A HIT WITH FEES , Is this legal?? I love where I work and dont want to leave but I need my money!! HELP PLZ

    Posted by : MH
  29. Raj,
    WE take all 401k account from no-citizens as they have no rights after leaving the USA on and expired visa. Sorry and good luck.

    Posted by : text t
  30. My wife is 62 and on ssd..she has a 401k with the company she had worked for…about $40,000 in it and its been sitting there for years…going up and down with the market…can she draw that all out now..and if so would there be taxes or penalties?

    Posted by : Jerry
  31. I am 58 years old as of August 2nd. I have been on workman’s comp since Oct.1 of 2011 and don’t see myself going back to the company I was at. They have refused to take me back with medical restrictions. I had Surgery in Feb. 0f 2012 and am do to go back for evaluation in Feb of 2013. I need to take money out of my 401k not my IRA to help get by. Do you think I can qualify for no penalties, just the tax?

    Posted by : Mark
  32. I’ve had three knee surgery’s and this last surgery might keep me from going back to my job. I’ve been off work over 6 months now and money is getting tight. Anyway I have 65,000 in my 401k and was wondering if I pull that money out now how much will I actually get. By the way I’m 33 not married and have no kids. Also was thinking about usin the 401k money to start my own business. Any advice would be appreciated. Thanks.

    Posted by : Jeff
  33. I am 64, I took 17600.00 out of my 401k this year since I lost my job. I did not take taxes out. My income will be 41,000.00 this is unemployment and SSI from my late husband. I used the IRS calculator to calculate my taxes, I do have taxes taken out of my SSI & unemployment. I will owe 3,800. Should I take out say 5000.00 more this year and have the take out about 80% and 10% state?

    Posted by : Marly
  34. What if I don’t even care about the penalties? They are telling me that I cannot touch the funds until the end of my severance period, which does me no good and frankly sounds like a lie. Any advice?

    Posted by : Eric
  35. I am 74 y.o and just retired from a part time job. I have 40,000 in my 401 account and they told me I have 60 days to do something with the money in the account, if I transfer the money to my back account will I be penalized or can I put it in cds? can you please point me in thr right direction.

    Posted by : frank m
  36. Is it age 55 or is it the year you turn 55 that you won’t have to pay a 10 % penalty.

    Posted by : Tony
  37. I am being sued by a prior credit card company. I have had cancer and lived away from my husband for several years. I didn’t realize I owed this money. I have enough in my personal 401K to cover the almost 10000 bill (5000 plus interest), but they won’t let me take it. This 401K has nothing to do with my regular retirement account. Why can’t I at least take out what I have put in, minus taxes? I have an outstanding loan, so the hardship ends up to me only about $600.

    Posted by : Chris
  38. I am desperate and could end up with garnishments to my wages, etc.

    Posted by : Chris
  39. I thought there were some hardship reasons. Is that true?

    Posted by : Gary
  40. File bankruptcy in credit card & start over

    Posted by : me
  41. how do you set up a
    withdrawal plan after age 66 as income from your 401K

    Posted by : Edgardo
  42. I am 62 and have about $25,000 in my retirement acct. A little of it is in a Roth the rest in a 401k. We owe about 20,000 to the irs for back taxes (long story); will I get penalized for taking all of it out to pay off the irs?

    Posted by : Annie
  43. I’m on unemployment and if I take out my 401k it seems I would lose my benefits because I have to let them know, is there a way I could not report and not pay the taxes up front, but do a 1099 at the end of the year ??

    Posted by : Nelsoul
  44. Can I get another loan this year if I pay a current one off early?

    Posted by : Anonymous
  45. Hi. I am 70 years young. My wife is 59 . young.We got a divore this year in the state of Tn. She gave me 30% of her 401k as part of the settlement agreement. About 130,000. what is the best way to remove the money with least penalty.If any. Thanks

    Posted by : jack
  46. im 52 and want to cash out my ira to build a garage..ira is 20,000.00 i beleive some of that was prepaid tax..how do i find out what portion was prepaid tax.

    Posted by : jaime
  47. I’m 5 months away from turning 60, can I withdraw from my 401K without penalties or having to pay tax ?

    Posted by : donna
  48. Donna – If you have rolled your 401k funds to an IRA, age 59 1/2 is the earliest you can withdraw funds from an IRA account and pay no early withdrawal penalty tax.

    If your funds are still in the 401k plan and you are retired, you can access 401k funds at age 59 1/2 and pay no early withdrawal penalty tax.

    If you are still working, you can access funds from an old 401k plan once you reach age 59 1/2, but you may not have the same access to funds inside the 401k plan at the company you currently work for. If you are still working for the company at which your 401k plan is at, check with your 401k plan administrator to see if your plan allows what is often called an “in-service” withdrawal at age 59 ½. Some 401k plans allow this and others do not.

    Posted by : admin
  49. if i change my 401k over to a roth at age 50 will I pay taxes or penalties on withdrawing this money from my roth at 59.1/2 also is there a limit on how much I take out?

    Posted by : i will retire soon too
  50. I have recently been let go at my job. I have an outstanding loan of little over $1200 i need to cash the 401k out completely, can they take what i owe out of the remaining balance take out the penalty and then send a check for the remainder balance?

    Posted by : lisa
  51. I will retire soon too – You must be separated from your employer to roll your 401k into a Roth IRA. You cannot do this if you are still working for the same company and/or employer unless you are aged over 59 ½. And, whether you can rollover depends on your plan administrator.

    Withdrawals from a Roth IRA are generally but not always tax-free and there are certain stipulations. For example, you have to be aged at least 59 1/2 for tax free withdrawals on the growth portion above principal.

    An advantage of the Roth IRA over a traditional IRA is that there are fewer withdrawal restrictions and requirements. Transactions inside an account (including dividends, capital gains and interest) do not incur a current tax liability.

    Posted by : david
  52. Firstly, I’ve never seen so many stupid questions posted on a blog. To find your answer read above.

    Secondly, if you’re under 35 and have some outstanding debt whether it be to a credit card company or the IRS or your Grandma because she loaned you $785 to go to Coachella, withdrawing from your 401k is beyond idiotic.

    Start living within your means, don’t live off the credit card and put at the very least 5% of your income into a 401k or Roth IRA. Or both. Even $50/month starting at the age of 25 will provide a nice nest egg in 40 years. If you can’t afford $50/month to invest in your future because your too busy buying smokes, hitting the bars and eating out 5 nights a week, you’re an idiot. You will be destined to clipping coupons for specials on cat food. Social security will not be there for you because it will be bankrupt or the payments from it will be so meaningless that all you’ll be able to afford is cat food at 30% off from Walmart or Target.

    Take care.

    Posted by : tate
  53. I,am 60 years old I took 60,000 from my 401 I had them take 20% for fed . I live in Rhode Island dose RI tax you on 60,000 or so much % of what fed took . thank you

    Posted by : LARRY
  54. When I retire at 66yrs and I take out my 401K, ,,what taxes will be taken out of it,,Fed, State, Social Security?

    Posted by : Karen
  55. Hi,

    I am 60, I have a loan with my 401k. I want to cash out,

    Posted by : Miguel
  56. I would like to contribute more money to my 401k plan. I am 47 years of age and currently contribute the maximum allowable. Is it true that at age 50 you can contribute more based on a catch up clause?

    Posted by : Mike
  57. I am defaulted on my 401 (B) account. Now I am layed off from my employer. I have a cash surrender balance of 2,848. My account balance is 16,000 with 13,000 defaulted. Now what?

    Posted by : Mary
  58. So when i’m 59 1/2 i can take all of my money out of my 401k and open a bank savings account .i know that i’m 58 1/2 i have to beg to get anyout.i have mercer

    Posted by : RICK
  59. Mike – Yes, that is right. When you reach the age of 50 or over, you can make an additional ‘catch-up’ contribution to your 401k plan. This additional limit allows people who reach the age of 50 before the end of the calendar year to make additional 401k contributions on a pre-tax basis. The current ‘catch-up’ limit is $5,500.

    Posted by : david
  60. Did any of you read the article? The answer to a lot of your questions are just a scroll up to the top. Spoon fed babies!

    Posted by : Ralph Machio
  61. Hi iam 54 considered disable on social security and in need of dental work that will cost around 15.000. out of pocket how do I go about getting a advance on my retirement I have in a high intrest account that needs to be refigured in august this year because I have had it in that account 5yrs now . thank you

    Posted by : jojo
  62. I am retired and have $400,000 in my former company 401k. I am 67 years old and would like to withdraw about $50k for an upcoming purchase. Is it possible to take a one time dispersment without starting systematic withdrawals? My financial broker recommends taking a home equity loan rather than withdrawing from the 401k but I have a strong reluctance to having any debt regardless of having money in an annuity to cover the home equity monthly payments. My incomes are ss for me and my wife as well as a company pension plan, we have monthly interest income from an annuity as well. So the issue is that I don’t want any monthly payments even if we can afford them so I am looking for the best place to liquidate some assests to pay cash…..

    Posted by : Dennis
  63. i was told i could take money out of my 401 at age 70 and a halve now i have been told i have to wait till i am 71 and a halve, which is right.

    Posted by : Pete.
  64. I am working full-time now and when I turn 70 in October I am planning to go 1/2 days. Can I pull my 401K out and still work for the same company. How high a tax rate will I be charged for the 401K I pull out? Thanks, Carolyn

    Posted by : Carolyn
  65. Pete – Once you turn 70½, you must begin withdrawals from your 401(k) unless you’re still working.You are free to begin withdrawing sooner than the law requires (which is when you reach 70½) if you retire or leave your job.

    Posted by : david
  66. I am 60 and I am going to take my 401k and build a house how should I do this

    Posted by : sam
  67. I have been laidoff, so how can I do to get my 401k refund?

    Posted by : Andrea
  68. Do I need my husbands permission to take money out of my 401k if I am over 59 1/2?

    Posted by : mary
  69. iam 57years old and retiring from police dept. my retirement money is not a 401 . its like a private retirement drop. not state. my wife is 64 and disabled along with my 21 year old daughter who is also on disability. if I just take the lump sum instead of rolling it over will I be penalized thanks

    Posted by : robert mathers
  70. The bulk of these questions in the comments are very scary…People are way to eager to blow their meager savings and pay penalties and the higher rate of taxes they will pay making a withdrawal while still working… They likely will spend it, then be astonished at the huge tax bill they will be stuck with at tax time.

    Posted by : OMG dude
  71. I started a 401 K at Twicthell corporation Dothan Alabama in 2003. When I left I forgot that I invested in the 401K program. I would like to know what happened to those funds. Thank you.

    Posted by : Alphonso Gillis
  72. I am turning 55 this December, would i have to pay 20% capital gains if i withdrew all of my account?

    Is there away to draw an amount out monthly and only pay income tax? and what is the most?

    Thank you,


    Posted by : victor caratachea
  73. I work for a company and have a 401k set up. I am only 26 years old please keep that in mind. I want to take 10k out to open up a 2nd business. (I am employed full time and own a ice cream parlor) I really want to expand my business and hopefully eventually work for myself full time. Am I able to take the amount I am short out for my personal business expansion?

    Posted by : Brandon
  74. so my last day at my current employer is about 2 weeks out. im under 55 years old and i have a loan out through my 401k. I have under 2k in there less than loan balance.I want to get my money out what do i have to do and how bad will i get beat up. I will no longer contribute to a 401k as the experiences have been horrible.
    thanks in advance

    Posted by : russ