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16 Ways to Withdraw Money From Your 401k Without Penalty

16 Ways to Withdraw Money from Your 401k Without Penalty*NOTE: if you’re looking for information about the CARES Act withdrawal, see the article 401k Distributions Due to Coronavirus (CRDs) for more details.

When hard times befall you, you may wonder if there is a way withdraw money from your 401k plan. In some cases you can get to the funds for a hardship withdrawal, but if you’re under age 59½ you will likely owe the 10% early withdrawal penalty. The term 401k is used throughout this article, but these options apply to all qualified plans, including 403b, 457, etc.. These rules are not for IRA withdrawals (although some are similar) – see the article at this link for 19 Ways to Withdraw IRA Funds Without Penalty.

Generally it’s difficult to withdraw money from your 401k, that’s part of the value of a 401k plan – a sort of forced discipline that requires you to leave your savings alone until retirement or face some significant penalties. Many 401k plans have options available to get your hands on the money (like a hardship withdrawal), but most have substantial qualifications that are tough to meet.

Your withdrawal of money from the 401k plan will result in taxation of the withdrawal, and if you do not meet one of the exceptions, a penalty as well. See the article Taxes and the 401k Withdrawal for more details about how the taxation works.

In addition to withdrawing money from a 401k plan, many plans offer the option to take a loan from your 401k. This can be a better alternative than the withdrawal. A loan is often the only way you can access the money in a 401k if you’re still employed by that company. The article at this link explains the differences between a 401k loan and a 401k withdrawal.

The list below is not all-inclusive, and each 401k plan administrator may have different restrictions or may not allow the option at all.

We’ll start with the obvious methods, all of which generally require the plan participant to leave employment:

1. Normal – Begin after age 59½ after leaving employment at any age

2. Age 55 Exception – Begin after age 55, having left employment after age 55 (also read about the potential Downside to the Age 55 Rule for 401k Plans)

3. Age 50 Exception – Begin after age 50, having left employment after age 50 from a job in a public safety profession, such as police, firefighters or emergency medical services for a governmental unit

4. Required Minimum Distributions – technically this one is covered by #1 above for most circumstances, but sometimes RMD is required of a person who has inherited a 401k, regardless of age.

5. Death – If you die, your beneficiaries are able to take distributions from your 401k without penalty.

6. Disability – If you are “totally and permanently disabled” by IRS definition, you may be able to take distributions from your 401k without penalty.

Now we’ll move into some of the not-so-obvious methods, starting with SOSEPP.

Series Of Substantially Equal Periodic Payments

This is the classic Section 72t (IRC Section 72(t)) method for early withdrawal exceptions to the penalty.  Essentially you agree to continue taking the same amount from your plan for the greater of five years or until you reach age 59½. There are three methods of SOSEPP:

7. Required Minimum Distribution method – uses the IRS RMD table to determine your Equal Payments.

8. Fixed Amortization method – in this method, you calculate your Equal Payment based on one of three life expectancy tables published by the IRS.

9. Fixed Annuitization method – this method uses an annuitization factor published by the IRS to determine your Equal Payments.

Section 72(t) provides additional methods for premature distribution exceptions  which can occur before leaving employment (if the plan allows):

10. High Unreimbursed Medical Expenses – for yourself, your spouse, or your qualified dependent.  If you face these expenses, you may be allowed to withdraw a limited amount (the actual expenses minus 10% of your AGI) without penalty.

11. Corrective Distributions of Excess Contributions – under certain conditions, when excess contributions are made to an account these can be returned without penalty.

12. IRS Levy – when the IRS levies an account for unpaid taxes and/or penalties, this distribution is generally not subject to penalty.

And lastly, here are a few additional ways that you can withdraw your 401k funds without penalty:

13. Auto-Enrollment – within time limits, when you are automatically enrolled in a 401k plan and you do not wish to be enrolled, permissive distributions may be allowed without penalty.

14. Qualified Reservist – If you were called to duty after September 11, 2001 and serve for at least 6 months, you may be allowed to make a withdrawal from your 401k during your active duty period without penalty.

15. Divorce – If a Qualified Domestic Relations Order (QDRO) is drafted as part of a divorce decree with the order to assign or divide and assign a portion of the assets of your 401k plan with your former spouse, this withdrawal is penalty-free

16. Roth IRA or Roth 401k Conversion – when you convert your funds from a 401k plan to a Roth IRA or Roth 401k, although you pay tax on the distribution, there is no 10% penalty applied. Usually you must have left employment to enact a conversion to Roth IRA, but not a Roth 401k.

17. (a bonus!) Birth or Adoption – With the passage of the SECURE Act of 2019, a new qualified exception is now available – to offset expenses for the birth of a child or an adoption. Each taxpayer may withdraw up to $5,000 (within one year of the birth or when the adoption is finalized) to pay for expenses associated with a birth or adoption. You are not allowed to take the distribution prior to the birth of the child or the adoption is finalized, only after the fact. You also have the option of paying this back (rules for the payback are still being developed at this time).

*18. (2020 bonus!) CARES Act withdrawal – With the passage of the CARES Act in early 2020, there is a new option available for 401(k) withdrawal without penalty: If you are impacted by COVID-19 (and the list of impacts is pretty comprehensive), you can withdraw up to $100,000 from your 401(k) plan in 2020 without penalty. Plus you can waive the standard 20% withholding, and furthermore, you can spread out the tax burden over three years (2020, 2021 & 2022). On top of that, you have the option of repaying (rolling back) the withdrawal at any point during those same 3 years.


  1. An Nguyen says:

    I have 25k in ROTH IRA. I am only 40 yrs old. I want to withdraw early because i don’t have a job, i have to pay back student loans & i have a new baby to take care. If i withdraw it all out, do i have to pay tax in 2021 or i wait until 2023 to file tax for early IRA withdrawal? i am confusing about this.

    1. jblankenship says:

      Your contributions to the Roth IRA can be withdrawn tax-free at any time.

      Any growth that has occurred within the account may be withdrawn as well, but generally a penalty of 10% will apply to this withdrawal, as well as income tax due on the distribution. However, if you were impacted by COVID-19, you may be able to bypass the 10% penalty. In addition, you will have the option of spreading out the tax owed on the distribution over the coming 3 tax years (or you can pay it all on your 2020 return due in 2021).

      Lastly, you have the option of replacing the withdrawn funds, both your original contributions taken tax-free as well as the growth on the contributions, at any time during the coming 3 years. If you re-deposit the funds into your Roth IRA at some point after a portion of the tax has been paid, you’ll then amend those tax returns from the intervening years to get back the tax owed.

      1. Robert says:

        Aren’t qualified withdrawals Tax-Free? So in the case of the covid-19, would these hardship type withdrawals be considered “qualified”? Making them tax-free as well as penalty free?

        1. jblankenship says:

          Withdrawals from 401k plans, unless they were Roth-designated or non-deductible contributions, are always taxable as ordinary income. The COVID-19 provisions only apply to the early withdrawal penalty – these withdrawals are otherwise taxable as ordinary income.

  2. Amber says:

    hello i am disabled and on SSDI i get a small amout of money everymonth which is barley enough ,my sister passed away and left me her 401k they want me to fill out a 120 month annuity or a lifetime monthly payment form i have no clue what to do if i fill this form out and start receiving this money will it effect my SSDI will i stop getting it ? please help thanks so much

    1. jblankenship says:

      Sorry, but I don’t know the answer for you. Your best bet is to talk to SSA about it, to find out what impact there will be when you start receiving this extra money.

  3. Alvin Flores says:

    I have an IRA, and been losing money all the way, non stop. Called and asked to remove it from the market, because they didn’t move it to protect my money, when they was in charge of the account, not even call me.
    I request moved the money to the “safe” side, out of the market and found in a week lose another ridiculous amount of money. Can I just transfer my IRA to a basic CD in order to avoid lose my retirement here? Cares Act will apply in this scenario?

    1. jblankenship says:

      This is between you and your IRA custodian – and I don’t think there’s anything in the CARES Act to help you out with this situation.

  4. Alan Wirth says:

    I am a 51 yr old retired police officer and am getting the 72t distribution. If I take the 100000 lump sum cares distribution will it violate the code?

    1. jblankenship says:

      Unfortunately I don’t see anything that would be an exception to the normal SOSEPP distribution rules (assuming you’re referring to a Series of Substantially Equal Periodic Payments), so I think this distribution would bust your plan. You would be subject to penalties back to the beginning of your SOSEPP if you did this.

      But I may have misunderstood your situation – can you elaborate more? Is the distribution from your employer’s plan? Are you using the Age 50 retirement exception for your distributions (rather than SOSEPP)?

      1. Alan Wirth says:

        We receive a lump sum IRA from the public safety retirement system, that take control of when we leave on top of our pension called a deferred retirement option.This puts money into an IRA for the last five years of our career. Since I was only 46 when I retired I couldn’t touch the money for 13 years. So we did the SOSEPP 72t to offset insurance premiums. It pays out 1100/month before taxes for the last 4 years. Due to the tax rates being so low as of now, we were going to take advantage of the opportunity to not take the 10% hit.

        1. jblankenship says:

          Ok, I understand now.

          As I indicated, I’ve seen nothing in the recent legislation which would allow a change to your SOSEPP distribution.

          1. Alan Wirth says:

            Thank you so much for your time!

  5. lpinkler says:


    I have a 401k and would like to take a loan out not a distribution or withdrawal a loan that I will have to pay back and I am currently awaiting my approval for unemployment insurance and haven’t received the stimulus check is why I need funds to hold my family and I over until one or the other happens. How does taking a loan out versus taking a distribution out effect my unemployment insurance.

    1. jblankenship says:

      I’m sorry but I have no way to know this. It’s entirely up to your 401(k) plan administrator.

  6. Hi there! In 2018, I was 45, I left my job for health reasons. I had about $10K in my 401K and pulled it to purchase a RV for my disabled husband and I to live in because we could no longer afford to live in the expensive place we were renting in San Diego, CA. We paid cash for our RV. Do I need to pay the 10% penalty on that money?

    1. jblankenship says:

      Yes, this was most likely covered on your 2018 income tax return.

  7. Charles Wallace says:

    Hi, I am considering withdrawing from a 403B to pay off my mortgage early. I now I have to pay taxes on the withdrawal over 3 years. No penalty if Covid Hardship (wife is layed off). What should I consider?

    1. jblankenship says:

      The primary thing you need to think about is what the tax cost is going to be for you for the coming three years. It’s likely to be less than it would be since it’s spread over 3 years (possibly keeping you from bumping up in brackets), but it’s still a cost that you’ve got to come up with from somewhere. If it was me I’d start putting aside the equivalent of your mortgage payments into some sort of untouchable savings so that you have enough to pay the taxes when they come due.

  8. Chris Zielinski says:

    I left my very large fast food employer almost 20 years ago and did not roll my 401k over. Over the years is has grown substantially and instead of reinvesting my dividends, I’ve been taking quarterly payouts over the last 4 years or so. I fully understand the tax consequences of that and since we’ve had children in college, it always balances out tax-wise and we don’t end up owing any money. I’m 54 1/2 and I’m considering withdrawing money to pay off some debt. I understand that ​If I take out money, I may be taxed at my ordinary tax rate and may be subject to a 10% penalty on the early withdrawal, and state and local penalties may also apply. The choices it gives me for withdrawing are Partial Withdrawal, Profit Sharing and ESOP Withdrawal and Total Distribution. I understand Total Distribution, but can you explain the first 2 withdrawal options? Whatever withdrawal choice I make, the federal withholding will come out immediately, but I’m wondering if by doing a partial withdrawal from the Profit Sharing and ESOP portion if I’ll be able to take advantage of Net Unrealized Appreciation or is that only on total distribution of ESOP?

    1. jblankenship says:

      You need to talk this over with your plan administrator to see if you can use NUA in your withdrawal strategy. My instinct says that if you have not taken any withdrawals from the ESOP and Profit Sharing portion, you may be able to use NUA on that withdrawal – but your plan administrator will have to confirm this for you.

  9. Bonnie says:

    I became disable at 53 can I make withdrawls without paying a pentalty.? Can I also use it to pay for medicare insurance premiums?

    1. jblankenship says:

      Total and complete disability (by IRS definition) is #6 in the list. If you fit that definition, you can use the money for any purpose without penalty.

  10. Renee says:

    I’m leaving my job after 3 years, I have a small 401k, about $7k. I’m 52 and was wondering if I could roll the money into a college account for my grand children to avoid paying taxes?

    1. jblankenship says:

      Unfortunately you cannot do this tax-free. You’d have to include the $7k withdrawal as income in the year that you take it out of the 401(k) plan. Plus, at your age this would be a non-qualified withdrawal, so there would be an additional 10% penalty ($700 more) on top of the tax. But then you could do whatever you want with the money.

  11. Eric says:

    I received a promotion at work, and managers do not receive 401k contributions like hourly employees do. Now my balance is frozen in place except for the monthly maintenance fees that are slowly taking my balance to zero. I’m losing money every single month. How can I withdraw this money without leaving the company?

    1. jblankenship says:

      You’ll need to contact the administrator to see what you can do. I’m surprised your fund is not invested in some way, so that capital appreciation would cause an increase that might make up for the fees.

  12. Terry Guarino says:

    I am 63, married, retired collecting a pension. I plan on converting my 401k to Roth 401k each year till FRA in 32 months. My plan is to stay in the 12% bracket. My questions is will my conversion, appx 64k this year, set off quarterly tax payments?
    Thank you for your time.

    1. jblankenship says:

      I’m not sure I understand your question. If you have more than $1,000 in tax owed when you file your return, you may face a penalty for underwithholding. So if you’re not withholding enough tax from other sources or sending estimated tax payments in such that you’ll have less than $1,000 in tax owed with your return, you should make an estimated (quarterly?) payment of income tax in order to avoid the penalty. To know if you have this penalty you’ll need to project your taxable income for the year – a CPA or tax preparer should be able to help you determine this.

      1. Terry Guarino says:

        Thanks for the reply. The thing is with a Roth conversion my company doesn’t withhold taxes for me. They do with a normal withdrawal. So my question was would I be penalized when I paid taxes out of pocket next year. You have answered that…yes I would. I’ll have to do a smaller conversion and a withdrawal that will cover the taxes while staying under 102,950.

        Thank you!

  13. Cynthia says:

    Hi, I am 59.5 and have a traditional 401K with 475K. I plan on taking out my money from the 401k and using 120K of for a down payment for a home. I will then roll over the rest to a liquid IRA. Do you know if I get a withdrawal penalty every time I take money out of the Liquid IRA or just the normal income tax? Thank you.

    1. jblankenship says:

      If you are 59 1/2 years old, there is no IRS withdrawal penalty, only the ordinary income tax. Your IRA custodian may have fees associated with your account, but that is dependent upon the custodian.

  14. Lisa says:

    I will be 55 in Oct and was just downsized at end of April. I have $270k in 401k. Can I withdraw all or a portion of the money over the next 5 years? The plan provides for partial distribution, lump sum distribution, calculated and fixed installments.

    1. jblankenship says:

      Legally you can, and as long as the plan will allow you to make those withdrawals (as you have indicated). Talk to your plan administrator for more details and confirmation that this is allowed.

  15. Cassie smith says:

    I wonder if the military reservist clause would apply to my family. My husband was called to active duty, which has affected our income, he is national guard reserve. Can I withdraw from my 401k under this clause being an active duty spouse? Or because it is my 401k and not his, would I still be hit with the 10% penalty?

    1. jblankenship says:

      I believe the clause you’re referring to is only for the reservist’s account, and your own account (in your case) would still be subject to the penalty. Does seem like there’s a very good case for including the spouse’s account, I agree.

      1. Cheryl says:

        I have left my previous employer where my 401k is with Merrill Lynch. My current employer has a program with John Hancock. I am 51yoa, does the “leave employment” mean employer or does it mean not working at all? Also, would I be able to do a partial rollover and only pay penalty/taxes on the part I don’t reinvest? Any other options to access part of my balance besides the loan programs?

        1. jblankenship says:

          “Leave employment” means only that employer where you have the 401k plan. You must leave the employer AFTER you are age 55 to avoid penalty, unless you’re in one of the jobs where age 50 is the requirement (see above). And yes, you can rollover part of your account and withhold some in cash (which will be taxable). Of the portion that you take in cash, there will likely be an automatic 20% withheld for taxes.

          Regarding other methods to access part of your balance, any of the 16 methods above are available. Otherwise, I don’t have any other methods to offer.

    2. Lenny Fisher says:

      I’m 61 and have been given a severance package to go away. Can I withdraw my 401 without penalties

      1. jblankenship says:

        Yes, you should have unimpeded access to your 401(k) after age 59 1/2 when you have left the company. You will have to pay tax on the withdrawals.

  16. Marie leon says:

    I am 67 retired and no longer work for my employer. I havs 491 k with the co I retired from. Can I withdraw without penalty

    1. jblankenship says:

      Yes, you should be able to.

  17. coolak says:

    I am in a unique situation. I had to do a early withdrawal from my traditional IRA for personal reasons. But i never used that money. I had sent a check and USPS lost the check. I am already past the 60 day grace period to return the money in my 401K.Is there anything that can be done to avoid paying the penalty

    1. jblankenship says:

      You may be in luck. Check out the article 60 Day Rollover Waivers. Specifically look at the section on Self Certification. You may be able to use the model letter to self-certify the fact that the check was lost in the mail, and thereby eliminate the penalty (you’ll need to complete the rollover ASAP).

  18. Su Balt says:

    I want to use part of my 401K for a down payment but the but my retirement company “Empower Retirement send me the form “Hardship” and for my understanding Hardship is for emergency and they charge more but they said that I need to use this form. for every $10,000 they charge me $1,500.
    They have another form called “Withdrawal” but they told me that I can’t use that form. Thank you.

    1. jblankenship says:

      The administrator of the plan is the final authority on how/if you can access your 401k funds. Unfortunately it sounds like they only allow a hardship withdrawal from your plan. You might ask about a loan of the funds, instead of a withdrawal…?

  19. Mike says:

    I’m just thinking ahead…I’m 45 years old right now, I’m expecting to have about 2million dollars between my 401k and my Roth IRA by the time I turn 52-55 years old.

    am i understanding it correctly that I could apply the 72t rule (SOSEPP) to retire early by taking equal payments for 5 years or when I turn 59.5 years old by either applying it to one of the accounts or roll the 401k into the Roth IRA (paying taxes on the rollover amount of course) and applying it to the entire amount once in my Roth.

    if I hit the 2mil mark at 52, 5 years means i’m only 57…not old enough for normal distributions (59.5) but beyond the 5 year requirement, how much can I take out of my account at that point without penalty?

    thanks, Mike

    1. jblankenship says:

      The SOSEPP must be in place for the longer of 5 years or until you reach age 59 1/2. So in your example, you’d need to keep taking the SOSEPP payments for 2 1/2 more years until you reach age 59 1/2, because that is the longer of the two. If you started the SOSEPP at age 56, you would have to keep it in place until you reached age 61 (the longer of 5 years or until you reach age 59 1/2).

  20. Michael Rys says:

    I’m 62 and still working. Since I’m of age to withdraw from my 401 without penalty, I’m considering transferring my bank savings account into my 401 which earns far more than bank rates. Will I be able to withdraw funds from my 401 periodically?

    1. jblankenship says:

      Unfortunately you are not allowed to make contributions to your 401k in that manner. The money you put into the 401k must either be from your earnings (by salary deferral) or from a rollover from an IRA or another retirement plan.

      You could always open up a standard non-tax-deferred brokerage account to transfer your savings into, which would allow you to invest in other kinds of assets (besides a regular savings account) which may produce a better return for you.

  21. […] A favorite post: 16 Ways To Withdraw Money From Your 401k Without Penalty […]

  22. […] A favorite post: 16 Ways To Withdraw Money From Your 401k Without Penalty […]

  23. Kristen Boswell says:

    Hi there.. I want to take put my 401k from Walmart. I am 37 years old. Its only 2,000. Will I get penalized for it?

    1. jblankenship says:

      Unless you meet one of the exceptions noted in the article, yes, you will be penalized on the withdrawal. You will also pay income tax on the withdrawal, regardless of the penalty.

  24. Susan B says:

    My husband is 62. He plans on retiring at 66. We own our property. Bought owner finance. Paid off years ago. We have most of what is needed to do a sustainable life-style. We don’t want a house. We have a 35′ RV. We need 10 or more acres with a well and electric, a shop would be nice but not necessary. Our intent is to take $8000 from his 401k and use this for a down payment. We keep missing out on good property. We are packing up what we need into storage and moving from this property and we already have people looking to buy. (Lake) Use the money from this sale to pay off land. Bank says we are 1st time home buyers. Never had a mortgage with a financial institution. We don’t want to close 401k just take $8000 for land. What are our qualifications and the requirements to get this money ASAP? He is still working for this company and is vested. Fidelity manages account. Excellent credit.

    1. jblankenship says:

      You’ll need to ask the 401k administrator what the requirements are for you to take a distribution from the account. Each plan can have its own rules.

  25. Sam says:

    my new employer enrolled me in a 401K with my permission or signature. I immediately filed a complaint, however, Lincoln Financial did not refund the money due me from the first paycheck until my refund was received for 6 months. # 13 ‘Auto-Enrollment’ I believe should apply, however, my previous employer placed a #1

    1. jblankenship says:

      It seems as if you have a reason to ask for a correction to the 1099R if it is coded only with a 1 – it should have the exception code 8 noted, and your W2 should be updated to reflect the additional taxable earnings. This is unless there are other circumstances that are unknown with regard to the refund.

  26. thereseann says:

    I have two 401k accounts. One from my current employer and another that was a QDRO. I am going to be 57 this year and would like to retire. Is it possible to take distributions from one or both of these accounts without incurring the 10% penalty?

    I just found your website. It’s a wealth of information. Thank you!

    1. jblankenship says:

      You’ll need to check with your current employer to see if you’re eligible to withdraw from the account while you’re still working there. If so, being under age 59 1/2 and still employed, you would still be subject to the 10% penalty on that account. The QDRO account may have the option for you to withdraw funds without penalty, but once again you’ll want to check with the account administrator to see what your options are.

      1. thereseann says:

        I do not want to withdraw from my current employer’s account while I am still working and will only make the decision to retire if I can withdraw penalty free from one account or another; whichever is most beneficial. If I cannot use the QRDO option, I understand that I may be able to use 72T, but not sure that will be enough income. I have also read on your site something about being able to withdraw from 401k when retiring if I am older than 55. Just trying to clarify. Thanks so much

        1. Hogroamer says:

          After you retire, you CAN avoid the 10% penalty by withdrawals from your current employers 401k plan.

          1. jblankenship says:

            But only if you retire or leave the company at or after age 55.

  27. JRam says:

    Hi, In my 401k i have 39,000 USD, if i am leaving out of country, how much i will get it in my hand if i want withdraw, is it a way i can avoid tax, is it a penalty if i am leaving the country also,

    1. jblankenship says:

      If you’re under age 55 when you leave the company you will owe ordinary income tax and a 10% penalty on the withdrawal. To calculate the ordinary income tax, just add the total amount of the withdrawal to your other income for the year and calculate the tax. Add 10% ($3,900) to the resulting tax to account for the early withdrawal penalty.

  28. Rik M. says:

    Hi Jb,

    I was part of an ESOP that was dissolved. Everything in my ESOP account is cash. Let’s say my account balance is $120k. I have until the end of Jan to move this money.

    I currently have a IRA account (let’s say the balance is $80K). I’m in the market to buy a home and I wanted to use some of my retirement funds for a down payment.

    I read the rule of “60 Day Rollover”, which states I can withdraw money from my IRA account tax & penalty free for 60 days, as long as I put it back.

    My question is, can i withdraw $75k from my IRA account (tax & penalty free) in Jan and in the middle of Jan I take my ESOP money and roll it over to my IRA, hence paying back the $75k.

    I am under the age of 59.

    Appreciate any insight you may have.

    Thank you

    1. jblankenship says:

      Is the ESOP money pre-taxed? Or is it taxed when you withdraw it from the account?

      I suppose either way it doesn’t really matter – you’d pay tax (or not) on the ESOP money when you withdraw either way… So the question you’re asking is: Can I put money from another source back into the IRA to satisfy a 60-day rollover? The answer is yes, it doesn’t matter where the money comes from to complete the 60-day rollover. You just have to make sure it’s all done within 60 days.

      1. Rik M. says:

        Thank you for the reply.

        My ESOP is pre-taxed. I won’t be taxed unless I take a distribution from the ESOP. My plan was to take $75k from my ESOP account and roll it into my IRA within 60 days.

        Here is some information on ESOP:

        Employees pay no tax on stock allocated to their ESOP accounts until they receive distributions, at which time they are taxed on the distributions. If the money is rolled over into an IRA or successor plan, the employee pays no tax until the money is withdrawn, at which point it is taxed as ordinary income.

        My goal is to use $75k from my IRA and put it towards a down payment and within 60 days take my ESOP money and roll it into my IRA, therefore paying back the $75k.

        Thank you!

        1. jblankenship says:

          Well, there’s going to be a problem – some of this is going to be taxed as distributed. You’re starting out with $120k in your ESOP and $80k in your IRA, for a total of $200k deferred. You’re taking $75k out of the IRA, and then taking $75k from the ESOP to put into the IRA. In the end you’ll have $80k in your IRA and $45k in your ESOP, for a total of $125k deferred. $75k was distributed, and you’ll be taxed on this, as well as penalized if you’re under age 59 1/2. There may be some relief from penalty on $10k of the distribution if this qualifies as a first home purchase.

  29. John St.Clair says:

    I’m 66 and need to cash out a 401K to pay for my granddaughter’s college tuition. Which tax year would be better? December 2017 or wait until the new tax plan hits in 2018?

    1. jblankenship says:

      In order to fully understand this, you’ll need to run the numbers. Do an estimate of your 2017 income with the additional included, and then do a projection using one of the estimators that have become available.

  30. dshaps says:

    Hi, I am 24 years old and I recently left my old company with which I had a 401k. If I decided to take out all 18K out of my 401k, do you know the total I’d be able to keep, and the total I’d owe? Thanks!

    1. jblankenship says:

      The amount that you take out of the account will be added to your other income for the year and taxed as ordinary income. Since I don’t know how much your other income is, there is no way I can know how much the tax and penalty will be on your potential withdrawal.

  31. Sandra edwards says:

    I am 61 1/2 years old. Can I take out the minimum $1,000.00 from my 401-k for anything I want to use it for and is there a penalty other than adding to my yearly income and paying taxes on it?

    1. jblankenship says:

      IF your 401k administrator will allow a withdrawal, the tax on the withdrawal (adding to your ordinary income) would be the only penalty at your age.

  32. T says:

    Question… Can an employer you have a lawsuit against stop you from withdrawing your 401 K if you’ve stopped contributing and they’re still contributing 3%?

    1. jblankenship says:

      If there is a restriction against withdrawals while you’re employed (as with most plans) you will not be eligible to withdraw your money. This doesn’t have anything to do with the lawsuit.

      However, if the plan documents allow an in-service distribution (meaning, you’re allowed to withdraw money while still employed) and they’re disallowing the withdrawal, it could be due to the lawsuit – which may or may not be legal. I’d ask your attorney to look into it if that’s the case.

      1. T says:

        Ok thanks a bunch!! Because my fiancé hasn’t worked for them since 2012.

      2. T says:

        Ok thanks!! My fiancé hasn’t worked for them since 2012. I’ll share this information.

  33. Bryan G Olivar says:

    I just got laid off and I am 53 yrs. Is there a way to pull from 401k to pay down my mortgage if anything pay it off?

    1. jblankenship says:

      Any withdrawal will be taxed at your ordinary income tax rates. Plus any withdrawal before age 59 1/2 that doesn’t meet one of the exceptions will be hit with a 10% penalty.

      1. Bryan G Olivar says:

        Thank you.

  34. felicia mutters says:

    53 years old, left job after 21 years. Does a health care working get taxed high for taking 401 k?

    1. jblankenship says:

      Any withdrawal will be taxed at your ordinary income tax rates. Plus any withdrawal before age 59 1/2 that doesn’t meet one of the exceptions will be hit with a 10% penalty.

  35. maria larrazabal says:

    Hi, I am 34 and I lost my job in the beginning of Aug of this year. I want to start a small service company and I have heard about the rollover. How could I start this. Where would I have to go or where could I call for more info. I am from NYC,NY

    1. jblankenship says:

      I suppose you need to talk to your plan administrator to initiate a rollover.

      1. maria larrazabal says:

        Where would you suggest for me to look for a plan administrator? I am sorry but I am really clue-less about this.

        1. jblankenship says:

          The 401k administrator is most likely whoever you receive monthly or quarterly statements from. If you don’t have that information, talk to your Human Resources department, they should have the contact information for you.

  36. Manikandan says:

    I have the question – if i invest on 401K for an 14 months and when i move back to my native other than US… If i stay out of US for more than a year and plan to withdraw my 401K, will it have any penalty apart from 10% default?

    1. jblankenship says:

      The only tax penalty you would have is the 10% early withdrawal penalty. However, your employer may have a vesting schedule which may reduce the amount of employer matching funds that you will receive upon leaving the company. Often this vesting schedule is five years for full vesting – you’ll want to check with your employer on the timeline.

  37. Tammy says:

    I was laid off from a job at the end of September. I had a very difficult time finding a job, so decided to get licensed in real estate. I am just getting started and anticipate it might take 4-6 months before I start making an income. I am still trying to decide what to do about my 401K from my employer. I was going to roll it ovee but now am thinking , I need to take the payout because I need it to live. Is there anything that might lessen the tax penalty because of hardship and being a single mother of 2?

    1. jblankenship says:

      If your circumstance fits any of the exceptions above, you could avoid the 10% penalty on your withdrawal. There are some other exceptions that you could possibly qualify for if the money was first rolled over into an IRA, so you might explore those options as well. Unfortunately, hardship alone is not an exception to the 10% penalty. Either way, you will be liable for the tax on the distribution, even if you can avoid some of the penalty.

  38. […] of the exceptions is met.  This list is for Traditional IRAs only. For a similar list regarding early withdrawal from a 401k plan, follow this […]

  39. Hi JB…quick question with a possible complicated answer. We moved over from the UK about a year ago and our visa is good for another 5 years. By default i enrolled to my employers 401K and the return has been good at almost 10%. However, from my family perspective we are not sure how long we will be staying in the US. Could be 5 years could be 10 years or more. We have bought a house so the intention is to stay for a while.

    If we were to leave to go back to the UK, we will need the capital to invest in property and start all over again – sad but true! Is 401K the right answer for me considering the penalties? I contribute generously to my 401K so i reckon there will be the best part of $70K in the next 5 years or so. Will it be better to opt out and invest on Index Funds for example? Maybe not such a huge return but money is accessible? I would hate to loose out on employer contributions though- currently capped at 3% for the first 6% employee contribution.


    1. jblankenship says:

      I think it makes sense to take part enough to receive the company contributions, with a caveat:

      You didn’t mention the vesting schedule – if it’s a five-year plan then you might want to reconsider participating in the 401k plan at all, because your timeline may be much less than the vesting schedule. If it’s a 3 year vesting schedule, it might be worthwhile to participate enough to get the matching funds.

      If you’re vested in these funds and you have been receiving (effectively) a 50% return on your own contributions via the company contributions, then the 10% penalty won’t have as devastating of an effect if you withdraw the funds prematurely.

      Other than that minimal participation, given your proposed timeline, I would not suggest participating further with more than the token 6% contribution. If your timeline changes you might adjust the participation level.

  40. Mirella medina says:

    I’m 55, can I make a loan to pay my cc debt

    1. jblankenship says:

      You’ll need to ask your 401k administrator about that.

    2. Jason says:

      One loan to pay for another loan? Think about it. How much will the 401k loan COST to get? (origination fees) etc? then, after that up-front cost, there may be other fees. take your current CC debt and use the calculators to show ho much interest over time you will pay. oh, and if you’re paying the minimums, you aren’t ready for a 401k loan. The repayment term will be less, meaning payments will be much more. Now, figure out how much you are goiing to pay on the 401k loan and put that to your CC. re-run the interest calculator on the new payment amount for the CC and compare it to the 401k loan, fees and interest. Is it REALLY worth it? and to have the IRS take you to the clerners for not being able to repay?

  41. […] We should add that there are other ways to take out money early. Here’s a good list of other alternatives. […]

  42. John M says:

    I recently bought a house and I used my credit cards to do pay for repairs and other things that go with a fixer upper. I used my credit cards for This. I have already used what loan amount I can for my 401k, which I have 12K left in. They say I can’t access it because these don’t meet withdrawal criteria. The CC debt is about this amount and is killing me financially. Is there anything I can do to access the money ?

    1. jblankenship says:

      Not while you’re still in the job, apparently. The administrator of the plan has final say on distributions.

    2. Nick says:

      take out the 401k money with 10% penalty you would lose $1200. But then pay off credit card bill and kill those interest payments.

    3. Hogroamer says:

      Maybe a home equity loan (if you have any equity) or a home improvement loan (for the work you did) will be at a lower rate or a new 0% credit card with a transfer option. Definitely time to stop spending.

  43. […] real answer is that this is a trick question. If you meet one of the exceptions noted in either the 401(k) withdrawal exceptions or the IRA withdrawal exceptions articles, you can take a withdrawal at ANY AGE without penalty, as […]

  44. dale weiler says:

    Hi im 40 yrs old worked 20yrs for an employer have a 401k with around 150k in it, my wife and i bought a farm in pennsylvania 6yrs ago and financially cant complain . I am no longer employed and make a living farming. i would like to withdraw my 401k and put it towards mortgage or just in savings account we r currently in 15percent tax bracket but barely what would my penalty be for doing so r do u have any suggestions i really cant forsee needing the money at retirement

    1. jblankenship says:

      At your age, any withdrawal from the 401k that is not rolled over into another deferred account (IRA or another 401k) will be taxed at ordinary income tax rates and a 10% penalty applied, unless an exception applies (as noted in the article). Taking a cash withdrawal could prove to be very costly – your best bet, if you want the money out of the 401k plan, is to roll it over into an IRA. This won’t make the money available to pay the mortgage, but you won’t be killed on taxes with this transfer.

  45. […] 55, there will be no penalty for taking distributions from the plan.  Normally, any distribution (other than specifically-qualified distributions) prior to age 59½ will result in the 10% penalty being applied, in addition to regular income […]

  46. Ken Cornwell says:

    Great site JB. I have a question. I received a portion of my wife’s 401-K with a QDRO. I want to get the money out and put it in my existing IRA. I am keeping some of the money to offset the cost of a divorce. What will that scenario cost me?

    1. jblankenship says:

      The amount that is not rolled over will be subject to ordinary income tax – but it should not be subject to the 10% penalty, as the QDRO allows you to withdraw from the account without penalty. Talk to the 401k administrator to make sure this is the case for your situation.

  47. T.T. says:

    Hi I recently left my job because of hour and days were being cut a the only way I could get money was to leave and cash out my 401k which is taking forever. Is there anyway they can get me my money any sooner before my eviction of my home?

    1. jblankenship says:

      Unfortunately that is between you and the 401k administrator. You should talk to them to see if they can expedite the process for you.

  48. Larry says:

    I am 50 years old and owe $100k for mortgage. I now have $100k in my 401K. Can I withdraw all the money from 401K to pay off my mortgage without the penalty?

    1. jblankenship says:


      A withdrawal from the 401k that doesn’t meet any of the exceptions listed in the article will be subject to the 10% penalty for early distributions.

    2. It is crucial to pay off your mortgage debt, and since you are planning to pay off that debt, is usually possible with any creditors to make a “deal” paying off your loan amount. You can ask your mortgagor if they are willing to take 60-80% of the loan amount, meaning, you can pay off 60-80k instead of the 100k, and this will greatly offset the amount you will be taxed on your 401k. Most likely, this will put some money back into your pocket, or worst case scenario, you break-even (which is what you were intending to do in the first place).

      “Diligence is consistency in hard work while being solely dedicated to accomplishment!”

      1. jblankenship says:

        I suppose you can ask, but I find it hard to believe that a mortgagor would be interested in a 60% payback. But I’m not in the real estate game, so maybe I just haven’t come across that situation before.

        Perhaps there are more extenuating circumstances that you didn’t reveal that provide the environment for such a bargain deal?

        1. I guess one situation could arise from a financial hardship, and if they could clarify that their circumstances meet that criteria, the bargain could be an option. I know that it works with creditors such as debt collectors and such, but I thought that mortgages would apply as well, but I could be wrong.

          1. Hogroamer says:

            Mortgage is a SECURED loan. They would foreclose and destroy his fico score once the mortgage went into arrears.

  49. Ernie says:

    My wife has been laid off from her job and has a small 401K there as well as another one from a previous employer. It’s been hard to find another job and she is wondering if she would be allowed to get her money due to hardship. She would prefer to take her money out than be forced to have to sell out home. Any suggestions?

    1. jblankenship says:

      This is a matter that she will need to address with her 401k administrator(s).

  50. john says:


    My wife and I are going all in on a change of lifestyle. We want to move to Central America and buy a B & B. We have two 401k’s . Is it possible to cash out completely and re-invest in a our business without taking the tax hit?


    1. jblankenship says:

      Possible? Yes. Easy? No.

      You’ll need to rollover the 401k funds into self-directed IRAs with a custodian who works with small businesses. You can probably find providers by Googling them. Then there are many rules that you must abide by in order to make sure you’re not using the funds in an unauthorized manner, and this will be the tough part… plus, being domiciled out of the country will complicate matters even further.

      I suggest that you locate an attorney to help you work through the concepts and pitfalls before you pull the trigger on this.

      Best wishes to you!

  51. Jen says:

    One person S-corp and I am the only person covered on my 401k plan. I want more control over my money and would like to rollover my 401k to an IRA. I’m not technically leaving my “employer” (myself) and the business will remain up and running. Would prefer to just cash out and take the hit on penalties/taxes. Can my corporation choose to stop offering the 401k?

    1. jblankenship says:

      Yes, you can stop the 401k and allow yourself to rollover the funds out of the plan, assuming the custodian is okay with that.

      1. A says:

        Similar to the abovementioned case Jen has stated, however, I am considering to convert my sole-proprietorship into the establishment of an “S-corp” in Nevada where I would be the only employee.

        However, I don’t know which retirement plan would be the best fit for an imminent rollover plan from my previous New York school employer’s 401k + 457b:

        Traditional IRA,
        Roth IRA,
        SEP IRA,
        Roth 401k, or
        Solo 401(k)?

        I like the optional/non-mandatory reporting to the IRS, but I don’t like the requirement to make a contribution every year, especially, if I’m not making much money (while teaching) during infancy…

        1. jblankenship says:

          For a rollover of the previous plan, a traditional IRA will give you the most flexibility.

          Then later when you’re making money in your S Corp you can establish a Solo K or a SEP (or something else), whichever fits your needs the best.

  52. JB says:

    Back when I was growing up, I remember that there was a way to take a distribution of your 401k, but as long as you re-invested it in another plan within a certain amount of time, there were no taxes or penalties imposed.

    I can’t seem to find any details on this. Is this law still in effect? And, if so, what is the time limit? Thank you.

    1. jblankenship says:

      Yes, you can take distribution from an IRA or a 401k plan and re-deposit it into another IRA or 401k plan within 60 days with no penalty. You can only do this once a year with IRAs.

      1. JB says:

        Great! Thanks so much for your response!

      2. sachagravett says:

        Great site! So much info!

        Can I take a distribution from my Solo 401k Plan while I’m still employed (by myself) and roll it to an IRA without taxes or penalty? Are there distinctions between pre-tax, after-tax, and Roth contributions to the Solo K?
        Been doing some poking around and found some helpful info at , but does not seem comprehensive enough.

        Also, been wondering if I could take withdrawals without penalty from after-tax and Roth contributions to a Solo 401k?


        1. jblankenship says:

          Thank you for your kind words.

          With regard to taking distributions while still employed, I suspect you could do this but the IRS would begin to raise questions about it. Essentially this sort of action is treating the employer plan as a sham and simply a conduit for increasing the amount of contribution to your IRA above the set limits. I would not recommend doing this.

          1. sachagravett says:

            Thanks for the response and for providing a great resource

  53. […] you need to know the rules, too. Know the vesting schedule for your company match. Understand that money you invest generally will not be available to you until age 59 ½ unless you’re withdrawing …, and you’ll still pay taxes on this withdrawal. If you do withdraw money early without meeting […]

  54. cory says:

    Hello – we are in the process of starting our own business and are looking to possibly withdraw from our 401K. We are below the age of 59 1/2 so I understand there are penalties. The 401K however, was opened by a company my husband no longer works for and hasn’t for the last 14 years. There was only a small amount in the fund when he left the job, and all the money invested since he left has been our money, no employer contributions. I thought I had read somewhere that if you take an early withdraw, you are not double taxed on the money you solely invested. Is this correct, or was I not reading it correctly?

    1. jblankenship says:

      ?? I don’t know what you mean by “double taxed”. If you take a withdrawal from a 401k that doesn’t meet one of the exceptions and you are under age 59 1/2, there will be tax and a 10% penalty on the distribution.

  55. Paul says:

    I desperately need to get some money out of my 401K as I am about to lose my home. My 401K says I have not hardship loans available and cannot use any of my money. Is this true? I can’t use my own money??? Please help

    1. jblankenship says:

      It’s possible that your plan is set up that way. Talk to your 401k administrator to see if there is any provision at all for you to access the money in your situation.

    2. Jose ala says:

      Yes you are allowed must show that house has been given a date for foreclosure

  56. Honey says:

    JB, I need your assistance… I became ill back in 2012… Was awarded Long Term Disability in 2013, was re-evaluated in 2015 for the “any occupation” for continuing my disability and was approved… also in 2014 I was retroactively awarded SSDI… I am still receiving LTD and SSDI… I am not working any hours. I live in a very expensive area of the country and need to take a little money out of my IRA for some unforeseen expenses. I have read IRS’s definition of “permanent and total disabled”… would I qualify for a penalty free IRA distribution? I am only 47 years old, not married, my family is not helpful… it is me, myself and I… any help you can provide would be greatly appreciated. HKS

    1. jblankenship says:

      If you meet the definition of permanent and total disability you should be eligible to withdraw funds from your IRA without penalty. You will have to pay tax on the distribution, however.

      1. Honey says:

        I find the definition very vague… does IRS’s definition mean really gainful employable (I can not hold a job because of good and bad day uncertainty, medication side effects, decreased memory, etc…). I can do my daily tasks, go to my Dr appointments… can not remember to pay bills without reminders, etc…

        Please help because it is not clear cut their definition, in my mind I think I qualify…

        1. jblankenship says:

          I won’t be able to legally interpret the rule for you either. I suggest contacting your doctor about it, most likely they have dealt with this in the past. If that doesn’t help, maybe an attorney? Sorry I can’t help any more than this.

  57. Jesse Davis says:

    Can I take out a loan from my 401k to purchase a vehicle or vehicle repairs.

    1. jblankenship says:

      You’re legally allowed to – you need to contact your 401k administrator to see if it’s allowed under your plan.

  58. Joe says:

    I retired from my former employer almost 2 years ago at age 55 and am now considering a 401K lump sum distribution taking out the company stock under NUA (cost basis as regular income, etc) and rolling the other investments into an IRA. I believe I avoid the 10% early penalty on the separated at/after age 55 exception. Does having gotten annual dividend payments (ESOP) from the 401K present any concerns on the penalty consideration?

    1. jblankenship says:

      No, I don’t believe this is a cause for concern. You might want to consult your 401k provider’s tax department for another professional’s take on it, but my understanding is that the provision has not limit on the timeline for withdrawals.

  59. Darlene says:

    Hi – I took out a 401k loan in 2015. In 2016 I was laid off and the loan went to default. Do I have to pay the 10% penalty? Or does the 55 years old 72(t) exemption apply? I am 58 years old Thank you.

    1. Darlene says:

      I found the answer by looking at the 1099-R and reading the 1099-R publication on The answer is No penalty. Thank you.

  60. Brittany says:

    were do you go to withdrawl from your 401k? Ive been trying to figure that out and I have got no where can anyone help me???

    1. jblankenship says:

      You need to contact your 401k administrator. If you don’t have the contact information your HR department should have the information you need.

  61. Marisa says:

    I’m 41 years old. I used to live and work in DC but I moved overseas for about 4 years and have never been back to the states. Is there anyway I can withdraw the money from my 401k account? and if federal income tax and state tax will apply, how much will that be?

    1. jblankenship says:

      If you withdraw your money from the 401k plan you will have to pay federal tax and, depending on your state, state tax. In addition, there will be a 10% penalty unless you meet one of the exceptions listed in the article.

      The tax would be based upon the total amount withdrawn – it is added to your other income and taxed as ordinary income.

  62. Marisol says:

    My mom is 55 and has been unemployed for 2 years and she has $16,000 in her 401K and wants to pull out all the money, would she be able to cash out and will she get a penalty?

    1. jblankenship says:

      She should be able to withdraw her funds from the account, but unless she meets one of the exceptions listed in the article, there will be a penalty on the withdrawal.

  63. AnnB says:

    Senario– Husband is 57 and still employed. His 401K has a significant amount of money in it and we would like to take out enough to pay off our home. Is this possible? He would not stop working or contributing to his 401K. Is a lump sum withdrawal allowed without penalty to do so?

    1. AnnB says:

      Or at least at 59 1/2?

    2. jblankenship says:

      Prior to age 59 1/2 while still employed it’s highly unlikely that the plan would allow a distribution at all unless there is a proven hardship. And absent that exception, any distribution under those circumstances is likely to be subject to penalty in addition to taxes.

      Some companies (but definitely not all) allow employees to take in-service distributions after age 59 1/2. That is probably the best option for you to pursue if the 401k is your only source for paying of the mortgage. However, since that’s 2 or more years away (and not a definitely available option, depends on the company), you should look at other options if you want to pay down the mortgage: get a second job, sell something, reduce other expenses, etc..

      1. AnnB says:

        Thanks for the followup—I will check with his plan administrator to see if an in service withdrawal is available after 59 1/2. I would just like to be done with the mortgage.

  64. sara says:

    I left the post office in 2010 using their FERS disability annuity. I had to withdraw half of my 401K due to bills. Now at the age of 58 I would love to get the other half of the 401K to pay off bills. I am unemployed, left my last part time job due to my arm breaking last July. Can I roll over half of the amount to a Roth and keep the other half to pay off my bills? Will I still have a 10% penalty? Degenerate disc is why I’m getting an annuity each month, not sure if that qualifies for being disabled in the IRS eyes. Would like $20,000 out of the 95,000 in the 401k- should I create CDs at the bank instead?

    1. sara says:

      Not sure I qualify for the 55 rule, since I retired 6 years ago. I will be 59 in 3 months. Wasn’t sure if putting the money in CDs will be tax free?

      1. jblankenship says:

        The age 55 rule applies if you retire in or after the year that you reach age 55. Putting money in CDs is not tax free.

        When you reach age 59 1/2 (in 9 months) you can access your funds penalty-free. You will still owe tax on the withdrawals.

        1. sara says:

          what about the age 50 rule? does that apply to Postal workers- sort of a government job. Do you still pay a penalty then?

          1. jblankenship says:

            As far as I know, the age 50 rule only applies to public safety positions, of which I don’t believe postal workers qualify.

    2. jblankenship says:

      Rolling over your 401k funds to a Roth (known as a conversion) is not a tax-free event nor is it penalty-free if you are under age 59 1/2 and no other exception applies.

  65. andiL says:

    My wife and I are purchasing a home and would like to withdraw my 401k to assist with the down payment or to pay off federal taxes owed. I only have 21k in it and left the company a year and a half ago that the 401k was set up with and have not been making contributions since. I’m guessing the 10 and 10 will apply to the witdraw. How long does it typically take to receive the funds once the request has been made?

    1. jblankenship says:

      That’s a question for the 401k administrator.

  66. Vanessa says:

    I am not working for a company that offers 401k, but have inn the past. How do i go about borrowing from it? Whom do i contact?

    1. jblankenship says:

      You need to contact the 401k plan administrator. Should have contact information on your statements.

  67. MikeMike says:

    Hi if I was wanting to take a withdraw from my 401k employer plan because of excessive debt legal fees loans ect. and decided to do a hardship withdraw to purchase a primary resident from a privet sale and no lender being used for purchase and the withdraw was approved but I decided not to go through with the purchase what would I or the seller have to be worried about?

    1. jblankenship says:

      You may have to pay a penalty on the withdrawal of funds if you do not meet one of the exceptions to penalty. Otherwise, you will certainly owe tax on the withdrawal. I don’t see any reason the seller is even involved with this transaction if you did not purchase the property.

  68. KDV says:

    I’m 55 and self-employed and I have a 401k that I rolled over 5 years ago and no longer contribute to. Can I withdraw money without penalty to pay off my mortgage?

    1. jblankenship says:

      If you leave employment (dissolve the company) then you should be eligible for a penalty-free withdrawal. Otherwise I don’t think you can distribute this money penalty-free without meeting one of the exceptions.

      1. KDV says:

        Sorry, I should have clarified, the 401K rollover was from a previous employer whom I left to start my own business.

        1. jblankenship says:

          If the money was rolled over into an IRA then you don’t have the age 55 option. As an IRA you’ll have to utilize one of the exceptions listed in the article 19 Ways to Withdraw IRA Funds Without Penalty to avoid penalties on the withdrawal. Either way, your age being 55 has no benefit for you on the penalty-avoidance front.

  69. Rick Wagner says:

    I am retiring in 3 weeks at the age of 57 and have a vested 401K with my company. Can I take out periodic distributions without the 10% penalty? Is there some 401Ks that do not follow this provision? I am hearing from the plan administrator that they do not allow withdraws under the §72(t)(2)(A)(v) provision.

    1. jblankenship says:

      Hmmm. I’ve never heard of that (not allowing the age 55 exception). Not even sure that it’s allowed for the administrator to disallow the provision, as it’s written in the tax law. I suppose there could be a rule in the plan that disallows any withdrawal by a former employee prior to age 59 1/2, or disallows periodic withdrawals (limits withdrawals to a complete distribution).

      If the latter is the case, you could determine the amount that you need between now and age 59 1/2, take that in cash, and then rollover everything else. There would be no 10% penalty on the cash withdrawal since you’re over age 55.

  70. Susan says:

    I have a QDRO 401k from ex-husband. I am unsure of the amount but am getting a bit over $100.00 a month but would like to know how to get a grand total on what is actually mine and how to get a loan or lump sum to pay some bills.

    1. jblankenship says:

      Talk to the 401k administrator, they should be able to tell you that.

  71. Dave says:

    My wife has approximately 40k in her 401k through fidelity. I myself had around $100k in mine and then transferred it to my own 401k plan after I left my employer of 14 years last November. For a brief time early in 2016 I had some help by borrowing money from someone. Then I took a 40k loan against my 401k. That money is running out. I have no income and neither does my wife. We have a 5 year old and a baby on the way (due in Feb 17). I’m attempting to join my dads business but I can’t start making money until I’m fully licensed. My wife and I have agreed that if I can’t start making money by January next year, that we would withdraw her 401k entirely. I’m familiar with the fact that there is a 10% penalty and that we would have to pay federal withholding, however my question is… if neither my wife or I are making any money right now wouldn’t our tax bracket be 10%? Also, being that we have a hardship right now and need to pay the mortgage and bills, is there anything we can do to pay only the penalty and forego the federal taxes?

    1. jblankenship says:

      Unless you fit into one of the categories for exemption from the penalty, early withdrawal from the 401k will result in the 10% penalty. Taxes will be due no matter what, at whatever your applicable tax rate is. In your case with little other income the tax rate will be lower, of course.

  72. brian wilbur says:

    I am 48 and have around 155k in my 403b was looking to withdraw as much as possible to be able to open a side business flipping homes. I am in the 28% tax bracket. I am still employed with company. And have no plans to leave. I understand they will access 10% early withdraw. which is roughly 15k. So would I receive a check for 140k and taxes would be due for 2017? Assuming a withdraw was done in Jan. 2017.

    1. jblankenship says:

      First of all, being still employed by the company and under age 59 1/2, it is doubtful that you will be able to make a withdrawal at all. This is a question for your 403b administrator.

      IF you can do this withdrawal, the withholding from a 403b withdrawal is a mandatory 20%, so from a $155k account you would receive a net $124k. Then when you calculate your taxes at the end of the year, the actual tax and penalty will be determined – it’s not a guarantee that the 20% withheld will cover it all.

  73. Spalding says:

    Your knowledge and responses have been very helpful and I plan on contacting my provider but was hoping you could help equip me going in to the conversation. I am borrowing from my 401K $50,000 for the purchase of a new construction home, but we just had a new baby and things got a bit more expensive at the hospital and as I look at the budget it looks like we will be about $8,000 short. I can’t get a loan from the bank because it will effect my mortgage. Is there any way I can borrow more even with the penalties? When I called them to do the initial loan they were saying the IRS would only allow me to borrow $50,000 for the new home. I have over $200,000 in my 401K. Is there anything else I can do?

    1. jblankenship says:

      $50,000 loan from your 401k is an IRS-imposed limit. No more is allowed.

  74. Honey says:

    So I am disabled, buying a house (both meet IRS requirements for 10% tax penalty exemption in my current situation) and I am unfortunately under 59 1/2. Do the IRA administrators hold the 10% tax penalty, pay it to the government and I need to collect it back when I do my taxes at the end of the year??? Trying to plan for things before executing contract.

    1. jblankenship says:

      If the money is in an IRA there will be no automatic withholding – you make this choice when you arrange for the withdrawal.

      In your case, since you seem to meet one or more of the exceptions you shouldn’t need to worry about the 10% penalty. You will still owe ordinary income tax on the withdrawal, but no penalties.

  75. Michael McDowell says:

    I don’t work for the employer anymore but I got another job through a temp service agencies. I have bout $900-$1000 in it can I get money out of it I’m behind on all my bills

    1. jblankenship says:

      You should be able to withdraw the funds – with penalties and tax. Talk to the administrator of your plan for details.

  76. Ida aka Eda says:

    I’m 66yrs old. I want to withdraw my 401k from CitiBank US. What no. should I call. Thanks

    1. jblankenship says:

      Contact information should be on your statement. Otherwise, check with the employer for contact information.

  77. Palz says:

    I am a foreign national and was by mistake put into 401k plan. I have almost $1000 In it. I would be leaving states in 6 months.
    Can I withdraw it?

    1. jblankenship says:

      Check with your 401k administrator.

  78. Debbie Reule says:

    I want to withdrawl, not borrow 2500.00 from my 401k plan, to pay off an small debt. It has 5500.00 in it. I’m still working part-time, and I will be 53 in December. What can I expect in penalties with my plan and IRS. Is this a bad move on my part? Thanks, Debbie.

    1. jblankenship says:

      Your plan most likely won’t allow a withdrawal if you’re still employed and participating in the plan.

      If you are not participating (sometimes plans don’t allow part-time employees to participate) and are allowed to make a withdrawal, then you can expect a 10% penalty plus ordinary income tax on your withdrawal.

  79. Cam says:

    I was terminated from my job they recently sent me a check it wasn’t for a huge amount right above 500 I’m in need of money can I cash it ?

    1. jblankenship says:

      If it’s made out to you, of course you can.

      But I’d take a moment to find out for sure what this money is for. If it is from your retirement plan, cashing that $500 check will likely cost you more than $100 in taxes and penalties. If you decide not to cash it, you should deposit it in an IRA to preserve the tax-deferral on the money.

  80. Willa M Nelson says:

    Hello I’m almost 59 have some health issues. Im still working for now but have macular degeneration. Dont know how much longer I’ll be able to work. My question is after im 59 1/2 can i cash in my 401k . soi can live on that money untill i can get disability?

    1. jblankenship says:

      If you are no longer working as of age 59 1/2 you should be able to withdraw funds from your 401k without penalty. If you’re still working it will depend on whether your plan allows “in-plan” distributions.

      1. Willa M Nelson says:

        Can i take a lump sum payment, Or just monthly payments?

        1. jblankenship says:

          It depends on the plan – generally you can take a lump sum unless your specific 401k plan restricts distributions somehow. Check with the plan administrator.

  81. Renee says:

    I would like to take a loan against my 401(k) so that I can pay off some medical bills, get caught up on my mortgage and invest in my business. I still work for my employer. What type of penalties will I be facing?

    Thanks a bunch.

    1. jblankenship says:

      There are no penalties for taking a loan against your 401k funds. You will be required to pay back the funds borrowed. Work with your plan administrator to understand the terms of the loan.

  82. TigerKat says:

    Hi, I’m really impressed with your level of responsiveness and the insightful advice on this page.
    I’m 37, divorced and getting ready to move in with my boyfriend of 3 years. Currently, I own a home and he is renting. We’ve been working on my house to get it ready for listing, and have another two weeks of work. This past weekend, we found our dream home. We have been pre-approved without a contingency of selling my house, but we’ll need extra funds to put down 20% on the house. My question is, can I access funds from my 401k to do this? I’ve heard that it might be possible to do so for 60 days without penalty… but obviously there’s no guarantee my house will sell within that time. Appreciate any advice you can offer.

    1. jblankenship says:

      Your best option would be to see about taking a loan from your 401k for this purpose.

      The 60-day option you mention is not likely given that you’re far under age 59 1/2 and you’re still employed by the company. Sometimes this is available (not often) but it’s almost always for folks who are at least age 59 1/2.

  83. Cara says:

    Hello, I’m currently looking to purchase a house for cash I want to use my Roth 401k to do that. Do you have any suggestion as to if that would be a option? I am currently still working with my employer and have taken 2 loans out against my 401k alreadyou. Would it still be possible to just draw out the funds without doing a loan?

    1. jblankenship says:

      Not while you are still working for the employer. If you don’t have any loans against the 401k currently you might be able to take another loan – that’s up to the plan administrator.

      1. Cara says:

        I appreciate your feedback

  84. Mark says:

    I got laid off at work I am 64 1/2 should I cash in my 401 to pay off my mortgage

    1. jblankenship says:

      Without knowing more about your situation, I can’t say for sure if that makes sense for you.

      You would not have any penalties with a withdrawal from your 401k at your age, so at least that is working in your favor.

  85. David says:

    Hello, recently left my employer, relocated to another state and in the process of selling prior home. In the interim of selling we are also in the process of buying a new home and can’t take a loan from my prior employer (due to no longer being employed) and new employer won’t allow a loan from a 401k rollover. My plan was to take a loan from new employer for down on the new home if prior house doesn’t sell soon. Is there any way to avoid a tax penalty, I.e. Transfer funds somewhere and repay a potential loan? Retirement is years away

    1. jblankenship says:

      Unfortunately there is not another way to access the funds without taking a withdrawal. If you are able to get everything arranged within 60 days of the withdrawal, you could replace the money into an IRA and then you’d have no penalty. But 60 days is a very short period of time…

  86. julie says:

    Jim – Do you know how the taxes work if there is a Roth 401k rollover (containing basis and gains) to a Roth IRA and then that money is withdrawn from the Roth IRA prior to age 59.5. Maybe the taxpayer can’t just withdraw what was originally the Roth 401k basis that’s now in the Roth IRA and may instead have to take out a blend of taxable gains and tax-free basis?

    1. jblankenship says:

      The rolled over basis would be tax free upon withdrawal prior to age 59 1/2, and anything above that amount would be taxed and penalized. The Roth 401k money takes on the “age” of the receiving Roth IRA – that is, if the Roth IRA must be in effect for 5 years before the amounts above the basis can be withdrawn penalty-free, even if the owner of the account is over age 59 1/2.

      1. Jackie says:


        My home was flooded back in March which caused a lot of structure damages including roof and unleveling of my home. Is there some way to get a loan against my 401K or withdraw funds to fix my home?

        1. jblankenship says:

          Talk to your 401k administrator to see what options you have available within your plan.

  87. Erik Ortiz says:

    I am 27 and I have around 45k on my 401K. Been with the company for almost 7 years. I am about to start my own business or staring my entrepreneurship. So I was thinking about using my 401K to Purchase assets.
    Now my question is that I still be working for the company for maybe another year and I don’t have a lot of faith on 401k plan specially knowing that the federal R. May raise rates again this year on September 20th but I will like to know how, where or who do I need to contact to withdraw my 401K

    1. jblankenship says:

      Not sure how the fed raising interest rates would cause your 401k to be in jeopardy, but of course that wasn’t what you asked.

      You need to talk to the 401k administrator to understand your options for accessing your 401k funds.

  88. […] exception to the 10% penalty on distributions from a qualified plan (but not an IRA, an IRA is split via a transfer incident to […]

  89. Teresa says:

    I have had my 401k for about 6 years and I have a loan with them. I am 55 years old. I went on FMLA in April or May of this year and have not been able to go back to work because of my medical condition. Short term disability has been giving me the runaround so I have not had a study income and have not been able to make my loan payments! I have applied for SS disability but have not gotten an answer as of yet. I now have need of some money for medical expenses that my insurance will not cover and my only option is to withdraw some from my 401k. Is this a possibility even though I have not been able to pay on my loan??

    1. jblankenship says:

      Talk to your 401k administrator. You may be able to take a withdrawal without penalty due to the medical expenses.

  90. Heidi says:

    I am planning to leave my employment due to health issues and will be filing for disability. Do I have to wait until the disability is approved by SSDI before I can withdraw funds from my 401K? I will turn 50 next month, and have a minor son.

    1. jblankenship says:

      Talk to your 401k administrator to see what they require.

  91. […] specific cases where you can withdraw the money with zero penalties. For example, the money can be withdrawn penalty-free in the case of unpaid medicals bills, divorce and other […]

  92. Robert Smith says:

    I was automatically enrolled in mine. What is the time frame for me to withdraw my funds if I do not wish to participate?

    1. jblankenship says:

      Check with your plan administrator. It definitely must be within the same calendar year, but there may be other restrictions that are plan specific.

  93. Sarah B says:

    Thank you for sharing your knowledge! Do I understand correctly that I am not able to withdrawal, with penalty even, unless I leave my employer?

    1. jblankenship says:

      Sometimes a plan will have provisions for pre-retirement or in-service withdrawals. These typically are only allowed after age 59 1/2. Otherwise, your only option while still employed is to take a loan from the plan – and that is dependent on the plan documents as well.

  94. Franny says:

    Hi! I was planning on withdrawing $10k from a 401k I am no longer contributing to. From my understanding there would a 10% penalty for withdrawing under 59 1/2, 20% withhold paid to the IRS…Then the remaining balancing cashed to me would be filed as added income at the end of the year correct?

    1. jblankenship says:

      Only the 20% withholding occurs when you make the withdrawal. You’ll calculate the 10% penalty when you file taxes for the year. So in your example, you withdraw $10,000 – $2,000 (20%) is withheld, so you receive a total of $8,000. When you file your taxes next year (for calendar year 2016) your income will be increased by $10,000 (the amount of the withdrawal). You’ll have credit for $2,000 of withheld tax. Then you’ll also have a 10% penalty ($1,000) added on top of your total tax for the year.

  95. Mohammad says:

    I worked for a big financial institution for over 18 years, now I am 60+ years old. I have a good amount (252K) of 401K with them. Can I start withdrawing every year a small amount from my 401K without any penalty, just a regular 10% tax holding. As I am thinking to just work part time, and get some other extra cash to take care of my regular expenses on a daily basis.

    1. jblankenship says:

      This is up to your 401k plan administrator – this is an allowable option, just not always available in every plan.

  96. Jen Oconnor says:

    I was on a leave of absence from work (for my own self) , it was never approved by the short term disability company. Can I withdraw for financial hardship, other than mortgage payments/foreclosure? The debt racked up when I was on leave. A year later, I am still sinking.
    I have a medically complex child w/ severe needs, Are their any special hardships I can take because of her needs, aside from owing for medical bills?

    1. jblankenship says:

      You will need to check with the 401k plan administrator to find out for sure if this is allowed in your plan.

  97. LGraham says:

    Sorry I googled but could not find answer. May I withdraw without penalty from MY ACCOUNT when my husband turns 55? I am his much younger wife :) He is listed as a beneficiary. Thanks!

    1. jblankenship says:

      No – the owner of the account must be 55 or older when he or she leaves employment in order to take advantage of the age-55 rule to avoid penalty.

  98. Mitch says:


    I am looking to payoff some excess debt so I can look to work on paying down student loans and work on buying a house. I have a 401k from my former employer just sitting there, nothing has gone into it in over 3 years. Would I be better off rolling it over to an IRA and then look to withdraw from that and avoid a penalty/ taxes, or would I somehow fall into one of the categories to avoid penalties in a direct withdrawal and take on the distribution of funds into my account to pay off the debt?

    This is just more of an info seeking question, not committed to doing either at this point.


    1. jblankenship says:

      Unless you have another exception that applies, moving the money to an IRA doesn’t avoid penalties – and you can never avoid the tax on withdrawal regardless of which plan the money is in.

      Paying off debt is not one of the exceptions to the penalty for early withdrawal – from either kind of plan.

  99. Jacqueline Maxwell says:

    My grandson was born with severe heart condition requiring several surgeries. My son’s health insurance does not cover all the expenses. Can he withdraw from 401K or without penalty?

    1. jblankenship says:

      This would fall under #10 in the article. Your son would need to contact his 401k administrator to find out if this is an available option in his plan.

      It’s an allowed option, but not all 401k plans have the option available.

  100. christine King says:

    My husband and I are legally separated. I am to get half of his 401K. Can he give me the full amount without penalities? Thank you Christine

    1. jblankenship says:

      If the QDRO specifies the entire amount, then the entire amount can come to you. Otherwise it’s not a penalty-free transfer.

  101. Linds says:

    If my husband takes money from our 401k early and roll it into an IRA, how long before it can we withdrawn from the IRA? He is no longer with the company he had the 401k with.

    1. Linds says:

      HIS 401k, not our! :)

    2. jblankenship says:

      You need to ask the IRA custodian this question. I think legally there is no waiting period after the rollover to withdraw, so it’s up to the IRA custodian’s rules to determine.

  102. I want to cash out my 401k its only about 5k so fidelity said at end of year it would be 10% penalty. Is it only 10% penalty or it can be more?

    1. jblankenship says:

      The penalty will be 10%, there will also be tax on the withdrawal. The amount of the withdrawal will be added to your other income and taxed on your tax return when you file next year. The company will also withhold 20% to pay the tax – that is mandatory.

  103. Deeana Hoyt says:

    hello, I am 47, I have worked for my company for 28 years, I have 50,000 in my 401k. I am leaving my job September 2, I can no longer do my job due to degenerative feet condition. I am going back to school this fall to prepare for a career change. Can I draw from my 401 to help retrain myself for my new job?

    1. jblankenship says:

      Education is not one of the options for penalty-free withdrawals from a 401k. You could transfer your 401k to an IRA and then education is an available penalty-free option from an IRA – just not a 401k.

  104. Mark Kerr says:

    I’m retiring I get a pension. I get lump sum 20k for vacation pay. They say the only way to avoid taxes is put in 401 or 457. I turned 55 in January. I retire 08/31/16. At age 55yo. I need some money to take care of some bills. Right now if I get the money straight from work the 20k gets knock down to 14k. What will it save me to put in 401 then take out? 55 rule or can I?

    1. jblankenship says:

      If you need the money from the lump sum for vacation pay, there is no benefit to you by contributing it to the 401k and then taking it right back out. Either way it is going to be taxed, so the net amount will be something less than $20k. The age 55 rule will only save you the 10% penalty – which would not apply if you don’t put the money in the 401k in the first place.

  105. Margaretspangler says:

    I’m retireing February,242017 want withdrawal my money in January Margaret Spangler work at amh bjc my address is 310scentlrel how get it when I retired in February24 2017 address is 310scentre Roxanne Illinois62084 depot it in my checking account I need information about how to do it or Will they send letters in january I turned65.February241952

    1. jblankenship says:

      Talk to your Human Resources department and they should be able to get you squared away.

  106. Marquse Blake says:

    Does anyone know HOW or where to contact 401k administration? We need to move forward on withdrawing monies.

    1. jblankenship says:

      You should have this information on a statement. If not, contact your Human Resources department.

  107. Shreyas Brahmasamudra says:

    Great article, thanks much! As a 31yr immigrant, if I decide to move move back to my home country by end of the decade, can I withdraw the whole amount in my 401(k) with an upfront 10% penalty? I have read about IRA and periodic payments but was wondering if there are smarter ways to do claim your 401(k) amount.

    1. jblankenship says:

      If you wish to withdraw the entire amount you will be subjected to the 10% early withdrawal penalty unless you meet one of the exceptions noted in the article.

  108. Cagney Thomas says:

    I am trying to buy my first home. I have been putting in to 401k since I was 18 and I am 30 now. I was wondering if you know if there is a possibility to withdraw my 401k to pay for the homes down payment and remodeling needs? Maybe just a loan against it?

    1. jblankenship says:

      A withdrawal from a 401k for a home purchase is not one of the exceptions to the penalties. Your best bet may be to take a loan from the 401k, or save up the money outside of your retirement plan.

  109. Twillrose47 says:

    My parents made me a personal loan to pay off my student debt from their HELOC. Is there a way for me to use my 401k money (obviously I’m not 59.5) towards that HELOC? The HELOC’s interest rate is a lower interest rate than a 401k loan. Can I gift them this money towards the house?

    1. jblankenship says:

      Unless you meet one of the other exceptions, your only choice (to avoid penalties) would be to take a loan from the 401k. Doesn’t sound like that’s a good option, you might as well pay them back in installments and save the interest differential.

  110. t1actual says:

    I am a founder and an executive in a C-Corp. Can I invest my 401k into my C-Corp or any company looking for an investment without a penalty?

    1. jblankenship says:

      I don’t know of any reason you couldn’t. You’ll want to work with your accountant to determine the best way to structure the investment – new shares, etc., in order to make sure it’s all above-board.

  111. Kashif harris says:

    I got suspended until further notice at and I don’t no money money to pay my rent and bills but I’m enrolled in 401k how do I go about getting some money out for the time being?

    1. jblankenship says:

      Contact your 401k administrator to see if there is any way you can withdraw or take a loan from your plan.

  112. Raghav says:

    My company is relocating me to Norway by terminating the current US contract. I have contributed for 401K for 3 years so far..As i wont be contributing any longer will it be wise to keep it until am 59 (which is 24 years from now) or take it out now. I am planning to buy a house in Norway and i was considering to use this money as a starting amount.
    Is there any exceptions to penalty if one is permanently moving abroad?

    1. jblankenship says:

      No, there is no exception for moving abroad. Not sure if the home in Norway could be considered a first home – you should probably call the IRS to find out for sure.

  113. Hi!
    I’m 53, and have been on SSDI for 12 years, permanently disabled. My former employer offered an option to withdraw or transfer my 401k early, and I transferred it to an account with Fidelity in 2014. As cost of living increases (rent, food, utilities, medications, health costs, etc.) I find myself with less and less available money. My husband is 42 and works, but our rent alone is astronomical, yet average for where we live. The Fidelity account is our only savings. Our car is just about dead, our credit card balance is getting too high for comfort, and I feel I need to make a withdrawal so we can get out of debt (interest on CC is 25% and is the best we can get) and get a car that’s not going to leave us stranded. We just don’t have enough income plus SSDI to save up money for a car, or to make extra payments on the CC. Here are my questions:
    1. Is there a way to avoid any of the penalties or taxes since I’m legally disabled?
    2. My Fidelity account is split with part of it ($15K) in something called “Cash Core”, an FDIC Insured Deposit account with a very low interest rate, and the rest of it ($27K) in Stocks, Bonds, etc. Looking at my account, it appears that the only amount avail for WD is the $15k. Since the rest ($27K) is invested in stocks, bonds, etc., am I assuming I can’t touch it at all? That’s the part of my account that’s losing money based on all the drama in the stock market. I’d rather take it from $27K since it’s doing poorly, but am I correct in that I cannot? Thanks in advance.

    1. jblankenship says:

      Given your circumstances you may qualify for an exception to the early withdrawal rate for for disability.

      Regarding the funds that can or cannot be withdrawn, you need to check with Fidelity to see what their rules are.

      My opinion is that you should find a way to reduce your expenses, as this withdrawal is at best a stop-gap. Hard times call for hard decisions, and it might be time to consider a move to a new location that is lower in cost.

      Of course, I know nothing about your circumstances beyond what you have told me – but that’s my take on your situation from what you’ve told me.

      1. Thank you so much for your response. We’ve cut back everywhere we can, and we’ve been looking for another place to live. But in this area, you are either safe with high rent, or live in an extremely dangerous and violent area for a lower rent. No happy medium. I truly appreciate you taking the time to reply to my questions.

        1. jblankenship says:

          You’re most welcome, and I wish you well – best of luck to you.

  114. jsoder2013 says:

    Thank you for your article and the follow-up comments. This is al very helpful. Is there a tax penalty with number 15, the qualified domestic relations order? Does it matter how much the amount is? What is the loan amount on any 401K and how does that work?

    1. jblankenship says:

      No penalty, but there are taxes on the distribution for a QDRO.

      Regarding loans, you’ll need to talk to the 401k administrator to learn how that works.

  115. Jason R says:

    I am thinking of leaving my employer and going to trade school. I plan on using some of my 401k money to pay for the school. Is the portion of the 401k that I would use to pay for the school subject to the same tax and penalties as the rest of it. I am 53 with approx 40,000 in my 401k

    1. jblankenship says:

      Yes, your withdrawals from the 401k would be subject to tax and penalty. However, if you rollover your account into an IRA, there is an exception to the penalty for education expenses which you might take advantage of.

      1. Jason R says:

        Thank you for the IRA tip. That was very helpful

  116. Jay Franks says:

    I recently lost my job due to vehicle problems and not having transportation back and forth to work. I may end up having to take out money from my Merill Lynch account to pay certain bills. Should I expect a 10% penalty? If the penalty does occur how would I go about paying that 10%.

    1. jblankenship says:

      If you’re under age 59 1/2 you may face a penalty on the distribution. You would pay that penalty when you pay your taxes for the calendar year.

  117. Frank says:

    What if im temporary disabled and need money for mortgage extc.?

    1. jblankenship says:

      If you have high unreimbursed medical expenses to offset a withdrawal, that could apply as an exception for you. Otherwise, a temporary disability does not qualify as an exception.

  118. Rene says:

    I am 46 years old I been with the company for 23 years my position will be eliminated I was offered a severance package what are the penalty if I was to collect my 401k ?

    1. jblankenship says:

      If you withdraw your 401k and do not meet any of the exceptions, there is a 10% penalty on an early withdrawal. Plus you will pay income tax on the withdrawal as well.

  119. Bec says:

    Can I take money out of my 491 k to plate my car?

    1. jblankenship says:

      I didn’t see that in the list

  120. Mark says:

    HI, My Wife and I are getting ready to retire. She is going to do the 55 rule and in a year I will be 59 1/2 and will be able to collect my 401K without penilty. My question is, they say they have to hold out 20% now and send to the IRS and we will then claim the 55 Rule on our taxes to regain it. Is this how it normally works or can they the send you your whole amount and then you pay tax’s at tax time. We want $100,000, will we only get $80,000?

    1. jblankenship says:

      Yes, that’s the way it works – there is a mandatory 20% withholding on any cash withdrawals from a 401k.

  121. Steve says:

    My wife turns 55 this fall. Her company is closing sometime early next year. She would like to take a large sum from her 401k early in January….then either walk away from work or be one of the folks who turn out the lights.

    Would this still qualify as a penalty free distribution? Obviously there are tax implications.

    1. jblankenship says:

      If she’s over age 55 when she takes the withdrawal/separates from the company, there should be no penalty on the withdrawal. Naturally there would be ordinary income tax owed on the withdrawal.

      1. Stev says:

        Thank you. I appreciate your quick response

        1. Jane says:

          i believe she would need to separate from service before taking the distribution, or the 10 percent penalty would be triggered. If she takes the distribution in January and terminates her employment in February or March, that could be a problem.

          1. jblankenship says:

            Yes, that’s correct Jane. I had implied that fact, but you stated it much more accurately.

  122. lady gibbs says:

    I have 1700.00 but only need 1000.00 for my rent can I withdraw for hardship

    1. jblankenship says:

      Check with your plan administrator.

    2. Tiare says:

      I have left my
      Company, been rejected unemployment and was wondering if I am able to cash out of my 401k?

      1. jblankenship says:

        You should check with your 401k administrator.

  123. My Mother is retired and is looking to purchase a home for retirement. Is there a chart of which states dont impose a “Penalty” tax for withdrawing from a 401K. Its clear the fed made it IMPOSSIBLE to avoid the 10% tax they impose, but maybe the state?


    1. jblankenship says:

      Home purchase is not one of the exceptions to the penalty for a 401k plan. In order to avoid the 10% penalty (but not regular taxation) for a withdrawal from a 401k she must meet one of the other exceptions listed above.

      An alternative would be to rollover the money from the 401k to an IRA and then the first-time homebuyer exception could apply, assuming that your mother would qualify for that exception.

      State taxation is another issue altogether, I don’t know what state your mother lives in, so I can’t comment on whether or not there are any penalties and/or exceptions to those penalties for 401k withdrawal.

      1. Robyn says:

        Florida does not have a state income tax at all :)

  124. Keith says:

    I’m 27 and am looking to retire in 20 years through aggressive saving and investing. Should I be maxing out my Roth IRA and my wife’s 401K before I make any regular investments, or is their a benefit to having the money more liquid?

    1. jblankenship says:

      If you’re planning to retire at 47, you’ll need some non-deferred money to help you get by until you reach an age at which you can access your retirement funds. I like to look at this as three different types of savings – regular deferred (like 401k or traditional IRA), Roth, and traditional savings (or taxable brokerage). Each type is taxed differently – the deferred money is taxed as ordinary income; Roth, no tax; and traditional savings is only taxed at capital gains rates.

      The liquidity of the traditional savings will be useful when you retire if you do so at 47. I’d max out the other types of savings first though, and then as your capacity to save increases you can start putting money into the third type of savings.

  125. Jennifer says:

    Four years ago I went through a bad divorce leaving me with about $20k in credit card debt and an empty home that I couldn’t afford to keep. The divorce decree gave me 60 days to refinance or sell the property. At my wits end, I sold the property for less than I owed because the mortgagee was already threatening foreclosure. This eliminated any chance of making a profit to pay debts so I tried to cash in on my 401k retirement to avoid bankruptcy. I was told that I could not cash in under any circumstance except termination of employment. This forced me to file chapter 7 and I have felt mislead by my company. Is it true that I could not have used the funds in my retirement?

    1. jblankenship says:

      Generally to withdraw funds from a 401k you must have left employment. Some plans have a provision to withdraw after age 59 1/2 while still employed, but not many have this option.

  126. Rajan says:

    I have joined an organization recently in US and was paying for 401K as of now (since last 3 months). I am now moving back from US to my own country and need to get 401K withdrawn. How do I do that?

    1. jblankenship says:

      Contact the 401k administrator to see what your options are for withdrawing from the plan.

  127. […] 16 Ways to Withdraw Money From Your 401k Without … – If looking for ways to withdraw money from your 401k, this is a list of 16 ways you may be able to do so without penalty. […]

  128. Latoya Armstrong says:

    If u have a loan out on your 401k can u still cash out

    1. jblankenship says:

      If you have left the company, your outstanding loan is considered to have been cashed out and you’ll owe tax and possibly penalty on this money. Nonetheless, you can still go ahead and cash out even though you have a loan, if you have left the company.

      1. Deanna says:

        What if you are 55+ at the time of leaving the company and their is an outstanding loan that is considered cashed out? Will the penalty apply then or just the taxes due (and the added income at the end of the year)?

        1. jblankenship says:

          Yes, it is considered cashed out at that time – but no penalty should apply since you’re over 55 and have left the company. Only taxes will be due on the unpaid balance.

  129. Robert Bowman says:

    I understand it is now possible to withdraw money from a 401K without taxes and penalty to invest in a business? Is that true?

    1. jblankenship says:

      Not that I’m aware of.

      I suppose it’s possible to rollover the funds from a 401k account to another employer’s plan that can then be invested in the sponsoring employer’s stock.

  130. Larry James Stinson says:

    How do you actually withdraw your money out

    1. jblankenship says:

      You’ll need to contact your 401k administrator. Typically you’ll fill out a form and submit for processing, indicating how you would like to receive the funds.

  131. […] 16 Ways to Withdraw Money From … – If looking for ways to withdraw money from your 401k, this is a list of 16 ways you may be able to do so without penalty. […]

  132. Markey says:

    What if you rolled over your 401k from a previous employer into your current employer’s 401K and then later qualified for the 55 exception with the current employer. Is the whole account balance exempt from the penalty or just the contributions during the time with the current employer?

    1. jblankenship says:

      The whole account balance is available under the age 55 rule if you’ve rolled in money from another employer’s plan or IRA.

  133. If you make a withdrawal and replace it within the calendar year, are you still liable for the penalties and taxes? I was going to use a small amount of a 401k loan for a lot on a future residence I plan to build. The administrator said they only do the loans on a purchase of existing house or new home full construction contract – not just a lot loan. I plan to buy the lot first and wait to build the house in 2017. The amount is a timing thing and I could do it out of my income cash flow, so it’s less than a 60 day withdrawal.

    Alternately, could I withdraw from my 401k and in 60 days put the money back into a Roth IRA?

    Thanks for help.

    1. jblankenship says:

      If it’s a loan, there are never penalties and taxes on the loan amount – but you must repay it according to the plan’s rules, which typically require no more than 5 years for repayment.

      If it’s a withdrawal (and not a loan), you’d need to re-deposit the money within 60 days to avoid penalties and tax.

      If you make a withdrawal and within 60 days rollover the money into a Roth IRA, you’ll owe taxes on the distribution but not penalties.

      All of this is dependent on whether your plan’s administrator will allow the loan or distribution.

      1. Thank you for the information Mr. Blankenship!

  134. Vonny Shade says:

    Hi I have a small 401k of 1700.00 I stopped having my employer withdraw money it’s been about 6 months I wanted to know if it’s possible to cash out?

    1. jblankenship says:

      If you’re still working at the employer it’s unlikely. But the plan administrator is who you will need to ask about this.

      1. Vonny Shade says:

        I should have elaborated a little more. Does it matter if I moved but still work for the same company but in a different state? But thank you for your advice sir. The reason for the cash out is to help with my uncle funeral.

        1. jblankenship says:

          You’ll still need to ask the plan administrator about it. Some plans allow inservice distributions, but many do not.

  135. SHERRY SCOTT says:

    I am 61 and my current employer does not offer 401k I have about 117,000 in my previous employer 401 just sitting there, what is the best thing to do with this money?

    1. jblankenship says:

      I would speak with a qualified financial advisor to help you understand what is the best option for you and your 401k money. I have virtually no information about your situation so I cannot advise you without gathering considerably more information.

  136. dayna says:

    Hi I took out money from 401k for a down payment on home. It was not my first home but it was my husbands and we financed it under his name. Is this considered first time buyer exception?

    1. jblankenship says:

      Not sure how this would be handled. Your husband would be considered eligible for a withdrawal for a first-time home purchase if he had no interest in a primary home for two years previously – but he didn’t take the withdrawal. I imagine that since you were not a first-time homebuyer and you took the distribution, it will not qualify. But you may want to check into this further.

  137. Ken says:

    Hi, I have a small 401k amount of $1,500 from a previous employer I worked for. If I request a cash out, how much of that amount should I expect? Also, is it something I should worry about filing taxes next year? Thank you.

    1. jblankenship says:

      If you cash out the account the administrator is required to withhold 20%, so you’ll get a net amount of $1,200 from your original $1,500 account balance.

      I have no idea if you should worry about filing taxes – personally I wouldn’t worry about it, just file the tax return and pay the tax. Life’s too short to worry so much about things like that.

  138. Diane says:

    My husband and I need help catching up with our mortgage. We have a loan out on his 401k, but need to know if we can take out a hardship on his 401?

    1. jblankenship says:

      You’ll need to ask the 401k administrator if this is possible.

  139. […] 16 Ways to Withdraw Money From Your 401k Without Penalty […]

  140. Sidney says:

    I have a 401k I have16000 dollars in there I need about $ 6000 to pay off some bills. how should I go about cashing out the $6000?

    1. jblankenship says:

      Contact your 401k administrator for information about making a withdrawal. If you’re still working at the job connected to the 401k it’s not likely you’ll be able to do this – but you might be able to take a loan against the 401k.

  141. Robert King says:

    Hi Again

    I should have asked for advice as to my options.

    I have been treated for non-Hodgkins Lymphoma and would like to begin enjoying part of the year with nature. With FEMA I could live where I want in America and deploy when they want me. With the City I have to work the entire year, excepting 2-3 weeks of vacation. It seems to me that when Ronald Regan started the Windfall Elimination Provision he was not thinking of folks with $1200 SS benefits and a $60,000 401K.

    Several years ago the Portland SSA only WEP’d City employees who were enrolled in the State Retirement System (PERS). At first, they told me that because it was a 401K, that I would not be WEP’d. Then one of the agents began questioning that my $60K 401K should be considered as a pension. It went all downhill after that.

    They did say there was one option where I could take payments from the 401K and they would WEP me each month, only 1/2 of those payments. Sounded great; .i.e. I withdraw a small amount (interest generated only) each month and get to keep the entire 401K principle. But that is not what they meant. They insist that I take payments out of the principle and of course that will exhaust the 401K fairly soon.

    One point of contention is that the Portland SSA office says I only paid into SS taxes 19 years. The national SSA people say I paid in between 29 to 32 years. I think the confusion is that yes, I do have 40 quarters but not all the years I worked paid into SSA taxes. My friend and I compared my SSA statement (earning years) with the SSA table that shows the “Significant Earnings” of all the years. It looks to me like I only have 23 years of paying SS taxes, while SSA in Portland says I only have 17 years. Formerly they said I had 19 years. It is crazy and causing incredible stress.

    Again….tbankj you

    1. jblankenship says:

      The small amount of withdrawal from the 401k is a prescribed amount – not your choice as to how much to withdraw. The chart for withdrawals is located at this page:

      It is true that the maximum WEP impact is 50% of your pension amount – whether a deemed pension that you’re not actually withdrawing at that rate (as you are not) or an actual pension, or 50% of the first bend point, whichever is less.

  142. Robert King says:

    I work for the a municipality that has not taken Social Security taxes from my pay during the 10 years I have worked for them. As a former (tenured) Endangered Species Wildlife Biologist I am currently in the hiring process to be a Reservist for the Federal Emergency Management Administration. I cannot afford to retire and may never. But working for FEMA will allow me to use my degree and also give me part of the year off to enjoy wildlife.

    The SSA has told me that when I leave the City of Portland Maine, it will immediately begin to WEP my already meager Social Security Benefits (about $1150./month) by about 40%….whether I draw on my 401K or not, before age 70 1/2..

    They say this is because Ithe City has matched my 401K weekly payments and so they consider my $60,000 401K a pension. I have sat down with the SSA office here in Portland Maine repeatedly on this and all we do it fight. They insist they will WEP me as soon as I leave the City.

    I currently draw spousal benefits of $766 but I want to begin drawing my benefits of about $1150.

    What can I do?

    Is it true that SSA cannot WEP me if I do not draw on this 401K after I leave the City at my age of 67 years ? Must I begin drawing at 70 1/2?

    Thank you very much

    Robert King

    1. jblankenship says:

      My understanding is that until you begin withdrawing the pension (in this case a 401k) you do not have WEP impact. However, with a 401k, things may be different since it’s not a traditional “pension” where you decide a starting date and distributions come to you on a monthly basis. It’s all about eligibility and entitlement to the pension – eligibility means that you have met all of the tests to receive the pension except for applying for it. Entitlement means that you are eligible and have applied for it. Perhaps with a 401k since it’s available to you in any amount at any time after you leave employment, WEP applies immediately.

      My apologies for not having a better handle on this – I suspect that SSA is probably right on this matter.

      1. Robert King says:

        Thank you for your prompt response.

  143. Conner says:

    I’m 21 and about to sign a lease for my first place. I’ve been contributing to my 401k at work for about a year and have $2300 sitting in my account that hasn’t been taxed yet. I would like to withdraw the entire balance and end any contributions to my 401k as money will be much tighter now that I’m no longer living at home – what is the best way for me to go about doing this? Would like to have an extra $1000 in my savings as I’m paying for 6 months of rent up-front in order to get the place I wanted. Thank you very much!

    1. jblankenship says:

      First of all, congratulations on getting your own place! That’s a benchmark moment that you’ll remember for a long time to come.

      As a financial advisor my purpose is to help people make good decisions about money. One of those decisions is between having things now versus having funds available for later. In your case, if the only way you can afford to have this particular place is to wipe out your savings, then I’d have to say it sounds like you have things out of balance. The money you’ve been putting aside in the 401k is not for renting a home today – it’s for living off of when you’re retired.

      Having $1,000 set aside in a savings account is a great idea – as an emergency fund, to keep you from having to go into debt (for example) when life throws curves at you. In order to build up this amount in your savings, I’d suggest that you temporarily stop making 401k contributions, sending that money into your savings account. Once you’ve built up $1,000 (or whatever makes sense) in the savings account, go back to making 401k contributions like before. Trust me, in 40 years you’ll look back on this and be very happy that you didn’t drain the 401k account.

      With regard to your comment about money being tighter now, you need to make choices about your expenses that includes regular saving – because if you don’t you’ll definitely regret it later. There are lots of resources on the ‘net to help you cut living expenses, seek them out and use them.

  144. weldonbailey says:

    wife is 58 and the company where she has 401k plan terminated her and has her as a contract employee, working for an employment agency with no benefits and reduced wages and hours. is she able to withdraw 401k funds without the 10% penalty.

    1. jblankenship says:

      Yes, she should be eligible to do a withdrawal without penalty based on the age-55 rule.

  145. Jesus says:

    I just turned 59 but was diagnosed with a rare immune disorder last November. Will I be able to withdrawal funds without a penalty to cover all my medical bills. I see option 10, but not sure if that’s an available option for me. I am currently on short term disability and it looks like I will be switching to long term disability in 2 months.

    1. jblankenship says:

      You should ask your 401k administrator to be sure.

  146. virna says:

    Hi, I’m leaving my job because I’m moving to a different State. I want to cash out my 401K. I understand if I open an IRA I can cash some of my 401K and left some money in the IRA without penalties? I’m 40 years old.

    1. jblankenship says:

      Any money that you remove (take in cash and don’t rollover to an IRA) will result in tax and penalty. The money that you move (rollover) to the IRA will not be taxed or penalized for the transfer.

  147. cassie says:

    i will be 50 in a few months, due to a accedent my husbad was in and now staying in nursing home, i have been unable to work. our daughter wants to go college, can i pull out money to pay for it? how or what might be my taxation tate would i have?

    1. jblankenship says:

      You’ll need to talk to the plan administrator to determine you can make a withdrawal without penalty.

      The tax rate will be ordinary income tax – any withdrawal you make will simply be added to your other income and taxed using the standard tax tables.

  148. bill says:

    Hello, have you ever heard anyone taking funds from their 401k account, without penalty, to help refinance an upside down mortgage? If so what paperwork is required to avoid the penalty? This would be a financial hardship as the property is extremely upside down and the monthly payments were about to go from $2500/mo the over $4000/mo.

    1. jblankenship says:

      No, I’ve never heard of it, although it’s plausible. You should ask your 401k administrator if this is an option for you.

  149. Angelle says:

    I will be 55 in two weeks and I think I will be laid off next week. Will I have to pay the 10% penalty if I take part of my money out of my 401k. Also is there a limit on how much I can pull out?

    1. jblankenship says:

      Leaving employment in the year that you’ll reach age 55 is one of the exceptions noted in the article. You should be able to withdraw funds penalty-free.

      There is no limit on the withdrawal. Just realize that you will be taxed on anything that you withdraw as if it were ordinary earned income.

  150. Denise says:

    I’m a 40 year old divorcee who’s unemployed and attending college full time. I was rewarded half of my ex husbands 401k and really need to borrow from it in order to make ends meet while continuing my education. What would you advise in this situation?

    1. jblankenship says:

      If you rollover the money from the 401k into an IRA in your name, you may be eligible to withdraw money from the IRA penalty-free for qualified education expenses. See the article 19 Ways to Withdraw IRA Funds Without Penalty for more information.

  151. boo sal says:

    I’m turning 55 next year and I was laid off from the job that I had 401k with 6 years ago. so can I take my money out without being penalized.

    1. jblankenship says:

      Did you reach age 55 before you left the job? If not, then unless you meet one of the other exceptions listed in the article, you will be penalized if you withdraw money from your 401k.

  152. paul ferreira says:

    i am 5o and recently quit my job and moved to another state and now am working for someone else. Can i withdraw money from my previous employers 401k and use that to purchase a home and not pay the additional 10% penalty? or do i have to pay the 20% tax and 10% penalty no matter what?

    1. jblankenship says:

      Unless you meet one of the exceptions, you will owe the 10% penalty. All of the withdrawal will be subject to tax.

  153. Tarneshia Lee says:

    I have an outstanding loan on my 401k…I’m about to leave my job and I want to cash out my 401k. Will my outstanding loan balance, plus to 20% penalty br taking out of my vested balance before I receive a check?

    1. jblankenship says:

      The loan amount and 20% withholding will be deducted from your balance. You’ll have to claim the entire amount (including the loan) as income on your tax return for the current year, and if you’re under age 59 1/2 you’ll likely owe the 10% penalty in addition to the tax.

  154. Mike Myers says:

    I have an annuity fund with my Union. A year ago I became disabled after being diagnosed with cancer. I can not work and I am currently collecting Social Security disability payments. My Union claims I still can not make a hardship withdrawal and any type of withdrawal from my account. I orginally planned on returning to work but further diagnosis will probably have me out of work permanently. I am strapped owing tons of money in medical expenses (3 surgeries, chemo, radiation and now a bone marrow transplant). I’ve gone through my savings as i have very little income coming in from SS. Is there anything I can do?? I need my money!

    1. jblankenship says:

      It’s up to your union, they are the administrators of your annuity.

  155. Ray says:

    I am retired from my work. I am 57 years old and I want to withdraw for my 401k for a down payment for a house. Can you tell me how to avoid any penalties? Or should I roll over to IRA, to avoid penalty?

    1. jblankenship says:

      If you retired during or after the year you reached age 55, you can withdraw from your 401k without penalty, for any purpose. Otherwise, if you left employment before age 55 you will need to wait until you are age 59 1/2, meet one of the other exceptions in the above article, or rollover the funds to an IRA meet one of the exceptions listed in the article – 19 Ways to Withdraw IRA Funds Without Penalty.


  156. John says:

    Previous company eliminated my job last year (55 years old) now I’m 56 and want to pull money out (401K) for a down payment on a home.
    Will I get the usual 20% tax on the amount and avoid the 10% penalty?
    Can I pay the 20% taxes at the end of the year and factor in the tax savings by owning a home to save a little $$$.
    Could I move the funds into an IRA and not be taxed at all for a home loan?
    Thanks for any help…

    1. jblankenship says:

      If you move the money over to an IRA then the age 55 exception would no longer apply to a distribution in cash. So if you want the money to make a down payment, you’ll need to make a withdrawal of the funds from the 401k account to avoid the early withdrawal 10% penalty.