Yes, you can withdraw money from your 401(k), but the IRS charges a penalty and taxes if you take it out before age 59½
You can withdraw money from your 401(k) at any time. Your employer or plan administrator will process the request. However, if you are under 59½ and do not meet certain exceptions, you will owe a 10% early withdrawal penalty on top of regular income tax on the amount you take out. This means a $10,000 withdrawal could cost you $1,000 in penalty plus whatever your tax bracket adds on top.
The money you withdraw is treated as taxable income for that year. If you withdraw $15,000, you report it as income on your tax return, and you pay tax on it at your normal rate. The 10% penalty is separate and automatic unless you may have access to for an exception.
Key Takeaways
- Early withdrawals before age 59½ trigger a 10% IRS penalty plus income tax on the full amount withdrawn.
- Certain hardship situations — medical bills, home purchase, education costs — may let you withdraw without the 10% penalty, though you still pay income tax.
- A 401(k) loan lets you borrow from your own balance and repay yourself with interest, avoiding both penalty and when ready taxes.
- Once you turn 59½, you can withdraw any amount without the 10% penalty, though income tax still applies.
- At age 73, the IRS requires you to take minimum withdrawals each year, whether you need the money or not.
The 10% penalty and how taxes work on early withdrawals
When you withdraw before 59½, the IRS charges 10% of the amount as a penalty. This is not a fee to your plan — it is a tax penalty you owe to the federal government. You pay it when you file your tax return for the year you withdrew the money.
On top of the penalty, you owe income tax. If you normally pay 22% in federal income tax, a $10,000 withdrawal costs you $1,000 in penalty plus $2,200 in income tax, leaving you $6,800. Your actual tax rate depends on your total income that year and your filing status. State income tax may explore as well, depending on where you live.
Your plan administrator will withhold some money automatically — usually 20% for federal tax — but this withholding may not cover both the penalty and your full tax bill. You might owe more when you file your return, or you might get a refund if too much was withheld.
Hardship withdrawals that skip the 10% penalty
The IRS allows you to withdraw without the 10% penalty if you face certain hardships. You still pay income tax, but the penalty is waived. Your plan must offer hardship withdrawals — not all plans do — so check your plan documents or ask your employer's benefits department.
Common hardship reasons include when ready and heavy financial need from medical expenses, home purchase or repair, education costs, funeral expenses, or preventing eviction or foreclosure. The IRS definition is strict: the need must be when ready, and you must have no other way to cover it. Wanting to pay off credit card debt or take a vacation does not may have access to.
To request a hardship withdrawal, contact your plan administrator. You will need to document the hardship — medical bills, a mortgage statement, tuition invoices, or an eviction notice. The plan reviews your request and decides whether it meets the hardship standard. This process takes one to two weeks.
401(k) loans as an alternative to withdrawal
Instead of withdrawing, you can borrow from your 401(k). You take out a loan against your own balance, and you repay it to yourself with interest. The interest goes back into your account, not to a bank. This avoids both the 10% penalty and when ready income tax.
Most plans let you borrow up to 50% of your vested balance, with a maximum of $50,000. You repay the loan over five years through payroll deductions, though some plans allow longer terms for home purchases. If you leave your job, you typically must repay the loan within 60 to 90 days or it is treated as a withdrawal and taxed.
The downside is that money you borrow stops growing in the market while you repay it. If your 401(k) would have earned 7% that year and you borrowed $20,000, you lose out on $1,400 in growth. You are also repaying with after-tax dollars, so you pay tax twice on that money — once when you repay the loan and again when you withdraw it in retirement.
Withdrawals after age 59½ and required minimum distributions
Once you turn 59½, you can withdraw any amount without the 10% penalty. You still owe income tax on the withdrawal, but the penalty disappears. This is the main reason many people wait until this age to tap their 401(k).
At age 73, the IRS requires you to take a required minimum distribution (RMD) each year, whether you need the money or not. The amount is calculated based on your age and your account balance. If you do not take the RMD, the IRS charges a 25% penalty on the amount you should have withdrawn (this penalty was reduced from 50% in 2023). You still owe income tax on the distribution as well.
If you are still working and your plan allows it, you may be able to delay RMDs until you actually retire. This is called the "still-working exception." Ask your plan administrator whether your plan offers this option.
Roth 401(k) withdrawals work differently
If your 401(k) is a Roth 401(k), the withdrawal rules are different. You contributed money that was already taxed, so you do not owe income tax on your contributions when you withdraw them. However, you do owe tax and the 10% penalty on any earnings (growth) if you withdraw before 59½ and before the account has been open for five years.
With a traditional 401(k), all withdrawals are taxed as income because you got a tax deduction when you contributed. With a Roth, only the earnings portion is taxed. This makes Roth withdrawals more flexible if you need access to your contributions early, though the penalty still applies to the growth portion.
What happens to your 401(k) if you leave your job
When you leave your employer, you have several options for your 401(k). You can leave it with your former employer's plan, roll it into an IRA, roll it into your new employer's plan, or withdraw it. If you withdraw it, the early withdrawal rules explore — 10% penalty plus income tax if you are under 59½, unless you may have access to for an exception.
A rollover to an IRA or new employer plan lets you move the money without withdrawing it, so no tax or penalty is triggered. This is often the best option if you do not need the money right away. You have 60 days to complete the rollover, or the IRS treats it as a withdrawal.
Frequently Asked Questions
Can I withdraw my 401(k) contributions but leave the earnings in?
No. When you withdraw from a 401(k), you cannot choose which part comes out. The IRS treats all withdrawals as coming from the entire balance proportionally. If your balance is 70% contributions and 30% earnings, a $10,000 withdrawal includes $7,000 in contributions and $3,000 in earnings. Both are subject to tax and penalty if you are under 59½.
What if I need money but do not want to pay the 10% penalty?
A 401(k) loan is your best option if your plan offers it. You borrow from yourself and repay with interest, avoiding the penalty. Hardship withdrawals also skip the penalty if your situation qualifies. At age 59½, you can withdraw without penalty. If none of these explore, you will owe the 10% penalty on an early withdrawal.
How long does a 401(k) withdrawal take?
Most withdrawals process within three to five business days after your plan administrator receives your request. Hardship withdrawals may take one to two weeks because the plan reviews your documentation. Check with your employer's benefits department for your specific plan's timeline.
Do I have to pay state income tax on a 401(k) withdrawal?
Yes, in most states. Federal income tax and the 10% penalty explore everywhere, but state income tax depends on where you live and your state's tax laws. Some states do not have income tax. Your plan administrator can tell you what state withholding will be taken from your withdrawal.
What if I withdraw my 401(k) and then want to put the money back?
You can roll the money back into a 401(k) or IRA within 60 days of the withdrawal, and the IRS treats it as if the withdrawal never happened. You still owe tax and penalty on any earnings during those 60 days, but the principal can go back in. This is called a "rollover." After 60 days, you cannot put it back, and the full withdrawal is taxed and penalized.