401(k) Early Withdrawal — Penalties, Exceptions, and Alternatives (2026)

Need money from your 401(k) before age 59½? You'll generally owe a 10% early withdrawal penalty on top of regular income tax. But several exceptions let you access the money penalty-free — and there are alternatives worth considering first.

See the true cost with the Federal Tax Calculator→

The Standard Penalty

Component	Amount
Federal income tax	Your marginal rate (10%–37%)
State income tax	Varies by state (0%–13.3%)
Early withdrawal penalty	10% of the amount withdrawn
Mandatory withholding	20% federal (may not cover full tax)

Example: $30,000 Withdrawal at Age 40 (22% Bracket)

Tax/Penalty	Amount
Federal income tax (22%)	$6,600
State income tax (5%)	$1,500
Early withdrawal penalty (10%)	$3,000
Total taxes + penalty	$11,100
You keep	$18,900

You lose 37% of the withdrawal to taxes and penalties — and you permanently lose the future growth on that money.

Penalty-Free Exceptions

The 10% penalty is waived in these situations. You still owe income tax — just not the extra 10%.

Applies to 401(k) Plans

Exception	Details
Age 59½+	Standard penalty-free age for all retirement accounts
Rule of 55	Leave employer at age 55+ (50 for public safety); withdraw from that employer's plan
Disability	Must be permanently and totally disabled (IRS definition)
Death	Beneficiaries can withdraw penalty-free
Substantially equal payments (72(t))	Take a series of roughly equal annual payments for 5 years or until 59½
Qualified domestic relations order (QDRO)	Court-ordered distribution in divorce
IRS levy	The IRS seizes your account for unpaid taxes
Military reservist	Called to active duty for 180+ days
Terminal illness	Certified as terminally ill by a physician
Domestic abuse victim	Up to $10,000 or 50% of vested balance (SECURE 2.0)
Emergency expense	Up to $1,000/year, self-certified (SECURE 2.0, starting 2024)
Natural disaster	Up to $22,000 for FEMA-declared disasters

Rule of 55 — Often Overlooked

If you leave your employer during or after the year you turn 55, you can withdraw from that employer's 401(k) penalty-free. Key details:

Only applies to the plan of the employer you most recently left
Doesn't apply to IRAs or old 401(k)s from previous employers
If you roll the 401(k) to an IRA, you lose the Rule of 55 benefit
For public safety employees (police, fire, EMT), the age is 50

Hardship Withdrawal

A hardship withdrawal is a special provision in many (not all) 401(k) plans. It lets you withdraw funds for an "immediate and heavy financial need" while still employed.

Qualifying Hardships

Reason	Qualifies?
Medical expenses exceeding 7.5% of AGI	Yes
Buying a primary residence	Yes
Tuition and education fees	Yes
Preventing eviction or foreclosure	Yes
Funeral expenses	Yes
Home repair from casualty damage	Yes
Buying a new car	No
Vacation or travel	No
Credit card debt	No

Hardship Withdrawal Rules

Still subject to the 10% early withdrawal penalty (unless another exception applies)
Subject to income tax
Must have exhausted other sources (loans, savings)
Can't contribute to 401(k) for 6 months after (some plans)
Not required to be repaid

401(k) Loan — A Better Alternative?

Instead of withdrawing, many plans let you borrow from your 401(k):

Feature	401(k) Loan	Early Withdrawal
Max amount	50% of balance, up to $50,000	Any amount
Interest rate	Prime + 1% (typically 8-10%)	N/A
Repayment	5 years (15 for home purchase)	No repayment
Tax impact	None (if repaid on time)	Income tax + 10% penalty
If you leave your job	Due in full by tax filing deadline	N/A

When a 401(k) Loan Makes Sense

You need the money temporarily and can repay within 5 years
The amount is under $50,000
You're confident you won't leave your job during the repayment period

When It Doesn't

You might change jobs (remaining balance becomes a taxable distribution)
You can't afford the loan payments (payroll deductions)
You'd be reducing your retirement savings during prime growth years

The True Cost: Lost Compound Growth

Beyond taxes and penalties, the biggest cost of an early withdrawal is lost growth.

Age at Withdrawal	Amount Withdrawn	What It Would Be Worth at 65 (7%)
30	$20,000	$149,745
35	$20,000	$106,766
40	$20,000	$76,123
45	$20,000	$54,274
50	$20,000	$38,697

Taking $20,000 at age 30 costs you nearly $150,000 in retirement. Think of early withdrawals as borrowing from a much wealthier future version of yourself.

SECURE 2.0 Emergency Withdrawal (New)

Starting in 2024, SECURE 2.0 allows one emergency withdrawal per year:

Up to $1,000
Self-certified — no documentation required
No 10% penalty
Income tax still applies (waived if repaid within 3 years)
Can't take another emergency withdrawal until the first is repaid

This is designed for small financial emergencies without the full penalty hit.

See how an early withdrawal affects your retirement→

FAQ

Can I withdraw from my 401(k) while still employed?

Generally not for regular withdrawals. Most plans allow hardship withdrawals and loans while employed. Some plans allow "in-service distributions" at age 59½ while still working.

What if I need more than $50,000?

A 401(k) loan maxes out at $50,000. Beyond that, you'd need a hardship withdrawal (with penalties) or consider other sources: home equity loan, personal loan, or selling investments in a taxable account.

Does the 10% penalty apply to Roth 401(k)?

Yes — the 10% penalty applies to the earnings portion of early Roth 401(k) withdrawals. Contributions can be withdrawn tax- and penalty-free, but only after you separate from service and roll to a Roth IRA (or through specific plan rules).

Can I put the money back after an early withdrawal?

No. Unlike a 401(k) loan, a withdrawal is permanent. The only exceptions are the SECURE 2.0 emergency withdrawal (repayable within 3 years) and disaster distributions.