What are the current rules for 401(k) withdrawals?

Typically, you must be at least 59 1/2 to withdraw your 401(k) funds penalty-free. However, younger adults can make penalty-free withdrawals in select circumstances, such as to pay for large medical bills or to recover from economic loss following a federally declared disaster. You will owe ordinary income taxes on your withdrawals if the money comes from a traditional 401(k). Roth 401(k) withdrawals are generally tax-free, provided you're at least 59 1/2 and have had the account for at least five years.

Can I withdraw 100% of my 401(k)?

You can withdraw the full balance of your 401(k) if you're no longer employed by the company. However, if you do this, you'll pay ordinary income taxes on the withdrawal (unless it comes from a Roth 401(k)) plus a 10% early withdrawal penalty if you're under 59 1/2.

How much will I get if I withdraw my 401(k)?

When withdrawing money from a traditional 401(k), plans typically withhold 20% for taxes. You could also face a 10% early withdrawal penalty if you're under 59 1/2 at the time and don't qualify for an exception.

At what age is 401(k) withdrawal tax-free?

Traditional 401(k) withdrawals are never tax-free. You will pay ordinary income taxes on your withdrawal regardless of your age. However, the early withdrawal penalty goes away when you turn 59 1/2. Roth 401(k) withdrawals permit tax-free withdrawals once you're 59 1/2.

Complete Guide to 401(k) Withdrawal Rules

Don't withdraw money from your 401(k) without reading this.

By Kailey Hagen – Updated Apr 20, 2026 at 1:29 PM EST | Fact-checked by Parker Hicks

Key Points

Withdrawals from a 401(k) before age 59 1/2 generally incur a 10% penalty plus income taxes.
Penalty-free early withdrawals are allowed for hardships like medical costs or disasters.
At age 73, RMDs are required from traditional 401(k)s but not from Roth 401(k)s per SECURE Act.

Withdrawing money from a 401(k) sounds simple, but the rules vary significantly depending on your age, your reason for withdrawing, and what type of account you have. Get it wrong and you could owe taxes plus a 10% federal penalty on the full amount.

This guide covers every scenario in detail, from penalty-free qualified distributions to hardship withdrawals, early withdrawal exceptions, SEPP arrangements, RMDs, and the real after-tax cost of cashing out early.

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Roth 401(k) exception

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Note on state taxes: The 10% penalty is federal only. Many states also treat early withdrawals as taxable income, and some, like California, add their own early withdrawal penalty on top. Check your state's rules before withdrawing.

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The commitment trap

The most important thing to understand about SEPP: once you start, you cannot modify the payments until the SEPP period ends. If you change the amount, take an additional distribution, or stop payments early for any reason other than death or disability, the IRS will retroactively apply the 10% penalty to every payment you've already taken, plus interest. This is a serious commitment, not a flexible tool.

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List of exceptions to the 401(k) early withdrawal penalty

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Quick note

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FAQs

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About the Author

Kailey Hagen, CFP, is a contributing Motley Fool retirement analyst covering Social Security, Medicare, and retirement planning. Before The Motley Fool, Kailey was a research analyst for Reviews.com focusing on credit and banking products. She is a Certified Financial Planner® and holds a bachelor’s degree in English from the University of Wisconsin-Madison.

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