How to Withdraw Money From Your 401(k)

Approximately 6 in 10 Americans have a retirement account, according to a 2025 Gallup poll. ¹ If you’re among them, an employer-sponsored 401(k) may be your primary savings vehicle.  Millions of Americans contribute to their 401(k) plans with the goal of having enough money to retire comfortably when the time comes. Whether you’ve reached retirement age or need to tap your savings early to pay for an unexpected expense, it’s helpful to know how to withdraw from a 401(k). 

A financial advisor can help you build and expand your financial plan for retirement. Speak with an advisor today.

How to Withdraw From a 401(k) at 59 ½ Years Old

Like other tax-advantaged retirement plans, you’re generally expected to wait until age 59 ½ to withdraw from a 401(k). Unless you meet the eligibility requirements for the rule of 55, early 401(k) withdrawals are subject to taxes and penalties.  

If you’ve reached age 59 ½, you can contact your plan administrator or log into your account online to request a withdrawal. Here are a few rules to remember:

• Traditional 401(k) withdrawals at age 59 ½ or later are not subject to penalties, but the distributions are fully taxable at your regular income tax rate
• Roth 401(k) withdrawals at age 59 ½ or later are not subject to penalties or taxes, as long as the account has been open for at least five years
• Unless your plan rules state otherwise, you may generally take a full or partial withdrawal

What if you don’t want to withdraw your 401(k) at age 59 ½? You could leave it with your employer, though you should be aware that you may pay service fees to do so if you’ve left your job. If you’re still working, you can continue making your normal contributions so that your retirement savings continues to grow. 

A rollover is another option. You could roll 401(k) money over to an IRA or to another workplace retirement plan if you’re changing jobs rather than retiring. If you choose this option, consider a direct rollover vs. an indirect one. That way, your savings can move from plan A to plan B seamlessly. 

When You’re Required to Withdraw From a 401(k)

Traditional 401(k) withdrawals are mandatory beginning April 1 of the year after you turn 73. At this point, you must begin taking a required minimum distribution (RMD) every year. Thanks to the SECURE 2.0 Act, Roth 401(k) account owners are not subject to RMD rules. 

Do you need help figuring out your required minimum distributions? Try SmartAsset’s RMD calculator to learn more.

Here’s how to calculate your RMDs by hand:

• Find your life expectancy factor using the IRS Uniform Lifetime Table.
• Divide your 401(k) account balance as of December 31 of the previous year by this factor. 

The result is the minimum amount you must withdraw that year to avoid a 25% penalty on the shortfall. Your life expectancy factor is based on your age 

and reflects how long the government expects your savings to last. For example, the divisor for someone age 73 is 26.5, while for someone age 80 it’s 20.2. 

So, if you turn 73 this year and had $750,000 in your 401(k) at the end of last year, your RMD would be calculated by dividing $750,000 by 26.5. That comes to about $28,302, which you must withdraw by December 31 (or by April 1 of the following year if it’s your first RMD). You can withdraw more than this amount if you need to, but not less.

Why do you need to ensure that you’re taking the right amount of RMDs on time? Because if you don’t, the IRS can assess a penalty that’s equivalent to 25% of the amount not withdrawn. That’s a decent chunk of money you probably don’t want to give away to the government, so if you have to take RMDs it’s important to stay on top of them. 

How to Withdraw Money From Your 401(k) Before Retirement

While it’s not ideal to withdraw money from your 401(k) before you reach retirement age due to the fees and potential lost retirement income you could have, it might be necessary. There are three main ways to withdraw money from your 401(k) before you hit retirement age. Here’s what you need to know about each.

1. Take an Early Withdrawal

Perhaps you’re met with an unplanned expense or an investment opportunity outside of your retirement plan. Whatever the reason for needing the money, withdrawing from your 401(k) before age 59 ½ is an option, but it’s a costly one. That’s because early withdrawals incur a 10% penalty on top of normal income taxes.

While an early withdrawal will cost you an extra 10%, it will also diminish your 401(k)’s future returns. Consider the consequences of a 30-year-old withdrawing just $5,000 from his 401(k). Had the money been left in the account, it alone would have been worth over $33,000 by the time he turned 60. By withdrawing it early, the investor would forfeit the compound interest the money would accumulate in the years that follow.

2. Request a Hardship Withdrawal

The IRS defines a hardship as “an immediate and heavy financial need.” In certain circumstances, you may qualify for what’s known as a hardship withdrawal and avoid paying the 10% early distribution tax. You would, however, still owe income tax on the amount that you withdraw. 

Your401(k) plan rules will ultimately decide whether you’re eligible for a hardship withdrawal, and some plans don’t allow them. You may qualify for a hardship withdrawal to pay for the following:

• Medical care for yourself, your spouse, dependents or a beneficiary
• Costs directly related to the purchase of your principal residence (excluding mortgage payments)
• Tuition, related educational fees and room and board expenses for the next 12 months of postsecondary education for you, your spouse, children, dependents or beneficiary
• Payments necessary to prevent eviction from your principal residence or foreclosure on the mortgage on that home
• Funeral expenses for you, your spouse, children or dependents
• Some expenses to repair damage to your primary residence

The amount withdrawn from a 401(k) is limited to what is necessary to satisfy your financial  need. In other words, if you have $5,000 in medical bills to pay, you may not withdraw $30,000 from your 401(k) and use the difference to buy a boat. You might also be required to prove that you cannot reasonably obtain the funds from another source.

3. Take Out a 401(k) Loan

Another option for accessing your 401(k) without incurring the 10% penalty is simply borrowing from it. Your 401(k) plan may permit you to take out a 401(k) loan and forgo the income taxes and penalty associated with an early withdrawal. While you’ll be required to repay the loan with interest within five years, you’ll be repaying yourself. And unlike a conventional loan, a 401(k) loan doesn’t show up as debt on your credit report or require a credit check.

However, there are potential pitfalls to this option. In the event the loan isn’t repaid according to the terms set by your plan provider, the outstanding balance will be treated as a distribution and be subject to income taxes and the 10% early withdrawal penalty. That’s important to keep in mind if you plan to change jobs at some point, as the remaining loan balance would need to be paid in full to avoid taxes and penalties. 

There are other limitations, too. 401(k) loans cannot exceed $50,000 or 50% of the vested account balance. That means if you have $60,000 in your 401(k), you can borrow up to $30,000. And while normal 401(k) contributions are tax-deductible, loan payments are not.

Using the Rule of 55

The Rule of 55 allows you to take penalty-free withdrawals from your 401(k) if you leave your job in the year you turn 55 or later. For certain public safety employees, the age threshold is 50. This rule applies only to the 401(k) sponsored by your most recent employer and not to accounts you may still have with previous employers. Regular income taxes still apply to any withdrawals you take.

This option can be useful if you need income before traditional retirement age but want to avoid the 10% early withdrawal penalty. For example, someone who leaves work at age 56 could use the Rule of 55 to supplement living expenses while delaying Social Security benefits or other retirement income sources.

However, the Rule of 55 is limited in scope. You cannot use it on IRA funds, and rolling your 401(k) into an IRA after leaving your job would eliminate this benefit. Withdrawals are also permanent; once you take money out, it will no longer grow tax-deferred in your account.

Because taking money early can reduce your retirement savings, it’s important to plan carefully before using the Rule of 55. Consider your overall income needs, other available assets, and the potential impact on your long-term financial security before withdrawing funds.

Bottom Line

If you can, avoid withdrawing money from your 401(k) before age 59 ½. Early withdrawals come at a great cost, including a hefty 10% penalty and the future growth of your account. But if you have an urgent need for the money, see whether you qualify for a hardship withdrawal or a 401(k) loan. Borrowing from your 401(k) may be the best option, although it does carry some risk. Alternatively, consider the Rule of 55 as another way to withdraw money from your 401(k) without the tax penalty.

Tips on 401(k) Withdrawals

• Talk with a financial advisor about your needs and how you can best meet them. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• If you’re considering withdrawing money from your 401(k) early, think about a personal loan instead. SmartAsset has a personal loan calculator to help you figure out payment methods.

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