At What Age Can I Withdraw Funds From My 401(k) Plan?

Different rules apply at different ages when it comes to withdrawing from your 401(k) without penalties. The younger your age, the fewer options you have. This is especially the case if you're not yet retired. It can be frustrating if you need the money right now for non-retirement expenses, but the idea of any retirement plan is to ensure you'll have income when you retire.

Below you'll find what you need to know about withdrawing from your 401(k), including different rules and options available at various ages. From loans and hardship withdrawals to penalty-free access, how you navigate your 401(k) withdrawals can significantly impact your financial future, so it's important to be informed.

Withdrawing From Your 401(k) Before Age 55

You have two options if you're younger than age 55 and still work for the company that manages your 401(k) plan, but only if the options are made available by your employer.

You can take a 401(k) loan if you need access to the money, or you can take a hardship withdrawal, but you can only do this from a 401(k) account that's currently held by your employer. You can't take loans out on older 401(k) accounts.

You can roll the funds over to an IRA or another employer's 401(k) plan if you're no longer employed by the company, but these plans must accept these types of rollovers.

The earliest age at which you can withdraw funds from a 401(k) account without paying a 10% early withdrawal penalty tax is 59½, but the IRS does provide some exceptions to this rule. The penalty is waived if:

• You become totally and permanently disabled.
• You use the money for a first-time home purchase, but this only applies to withdrawals of up to $10,000.
• You use the money to pay for medical expenses that are not reimbursed by insurance.
• You use the money to pay for health insurance premiums during a period of unemployment.
• You use the money to pay for qualified higher education expenses.

These are the most common exceptions, but others are available. You might also be able to take a hardship distribution due to what the IRS refers to as an "immediate and heavy financial need," but you can only withdraw as much as is necessary to meet that need, and the agency clearly states that consumer purchases don't fall under this umbrella. Your 401(k) summary plan description should clearly state the circumstances that would qualify.

Withdrawing Funds Between Ages 55 and 59½

Most 401(k) plans allow for penalty-free withdrawals starting at age 55. You must have left your job no earlier than the year in which you turn age 55 to use this option. You must also leave your funds in the 401(k) plan after leaving your job in order to access them penalty-free, but there are a few exceptions to this rule. For example, funds are accessible as early as age 50 for many police officers, firefighters, and EMTs.

Make sure you understand the rules around the age requirements for penalty-free withdrawals. The rule won't apply if you retire the year before you reach age 55, so your withdrawal would be subject to a 10% early withdrawal penalty tax in this case.

Similarly, the age-55-and-up retirement rule won't apply if you roll your 401(k) plan over to an IRA.

Withdrawing From Age 59½ to Age 72

You can access your funds at age 59½ without paying an early withdrawal penalty if you've retired and your employment ended after you reached age 55. For an IRA account, age 59½ is the earliest you can withdraw funds and pay no penalty.

You can access funds from an old 401(k) plan after you reach age 59½ even if you haven't yet retired. The best idea for 401(k) accounts from a previous employer is to roll them over when you leave a job. You won't be hit with penalties if you withdraw from your old accounts if you're at least age 59½, but you should check with your human resources department about the rules for withdrawing from your 401(k) if you're still in the workplace.

Required Minimum Distributions

Required minimum distributions (RMDs) start at age 73. You must generally begin taking distributions from all of your tax-deferred retirement plans, such as IRAs and 401(k)s when you reach this age. You must take your first RMD by April 1 of the year following the year you reach 73.

Your plan might offer an exception to these mandatory distribution rules if you're still employed by the company that manages your 401(k), and if you're not the owner of the business. Check with your plan administrator to determine whether the company allows an exception to the required minimum distribution rules if you're still working at age 73.

Frequently Asked Questions (FAQs)