Guide to Taking Money Out of Your 401(k)

You may need to take money out of a 401(k). Here's what you need to know.

By Christy Bieber – Updated May 15, 2025 at 5:36 PM

Key Points

Withdrawals from a 401(k) after age 59 1/2 are penalty-free.
Early withdrawals face a 10% penalty unless exceptions like disability or the Rule of 55 apply.
You can avoid taxes and penalties if you roll over 401(k) funds into another 401(k) or an IRA.

401(k)s are incentivized plans to help Americans save for retirement. The government provides tax breaks to encourage you to contribute, but also enforces certain rules to discourage you from taking distributions before retirement. In some cases, taking distributions early can cost you a 10% penalty in addition to the ordinary income taxes you'll owe on withdrawn funds.

Let's look at all the approved ways you can take money out of a 401(k) and the penalties you'll incur if your early distributions don't fall within one of those exceptions.

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An infographic outlining how to withdraw money from your 401(k). — Image source: The Motley Fool.

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Adjusted Gross Income (AGI)

An amount that takes your total, or gross income, and makes certain adjustments to determine your income for certain tax break qualifications.

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About the Author

Christy Bieber is a contributing Motley Fool retirement and Social Security expert covering retirement planning, 401(k)s, IRAs, and other personal finance topics. Christy has written about finance since 2008 and previously taught business courses at Bryant & Stratton College. She holds a law degree from UCLA and a bachelor’s degree in English, media, and communication with a certificate in business management from the University of Rochester. In law school, she earned three CALI Awards for Excellence for the highest scores in civil procedure and contract law exams.

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