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When Can You Withdraw From Your 401k Or IRA Penalty Free?

If you are forced to withdraw funds from your IRA or 401k early, it’s helpful to know the rules and regulations around early withdrawals.

401ks, IRAs and other pre-tax retirement savings accounts are common ways to save for retirement, and millions of Americans pour money into them every year. Unfortunately, many of those same Americans take early withdrawals from these accounts due to hardship, loss of a job or other unplanned circumstances. According to a survey, 17% of Baby Boomers (the generation most likely to make an early withdrawal) used their 401k plan and other retirement savings to pay for an emergency expense.

The Cost of Early Withdrawals

Early withdrawals from an IRA or 401k account can be an expensive proposition because of the hefty penalties they carry under many circumstances. The IRS allows penalty-free withdrawals from retirement accounts after age 59 1/2 and requires withdrawals after age 70 1/2 (these are called Required Minimum Distributions [RMDs]). There are some exceptions to these rules for 401ks and other ‘Qualified Plans.’ Generally though, if you take a distribution from an IRA or 401k before age 59 ½, you will likely owe both federal income tax (taxed at your marginal tax rate) and a 10% penalty on the amount that you withdraw, in addition to any relevant state income tax. That tends to add up. Given these consequences, withdrawing from a 401k or IRA early is not ideal.

Try to think of your retirement savings accounts like a pension. People working towards a pension tend to forget about it until they retire, because there is no way they can access it before retirement. While that money is locked up until later in life, it becomes a hugely powerful resource in retirement. The 401k can be a boon to your retirement plan because it gives you flexibility to change jobs without losing your savings, but that all starts to fall apart if you use it like a bank account in the years preceding retirement. Your best bet is usually to consciously avoid tapping any retirement money until you’ve at least reached the age of 59 ½.

Sometimes individuals may not have the luxury of avoiding tapping into their retirement accounts, 10% penalty or no. Before you pay the penalty, be aware that there a few circumstances where the IRS grants exceptions to the 10% penalty rule. These exceptions may make it possible for you to tap your retirement savings in a time of need without having to pay the IRS the extra penalty for the privilege. They require some planning and care to implement, so it’s best to be aware of them before the need actually arises.

Retirement funds locked away?

While there are many very valid reasons that you may need to dip into your retirement savings early, try not to allow this type of thinking to lead to the feeling of money burning a hole in your pocket. While retirement may feel like an intangible future event, hopefully, it will be your reality some day. So before you take any money out, ask yourself – do you actually need the money now? Think of it this way: rather than putting money “away,” you are actually “paying it forward.” If you are relatively early on in your career, your present self may be unattached and flexible. But your future self may be none of those things. Pay it forward. Do not allow lifestyle inflation to put your future self in a bind.

With all this talk of 10% penalties, and not touching the money until you’re retired, we should point out that there is a solution if you feel the need to be able to access your retirement funds before you reach age 59 ½ without penalty — contribute to a Roth IRA, if you qualify for one. Because contributions to Roth accounts are after tax, you are typically able to withdraw from one with fewer consequences. Keep in mind that there are income limits on contributing to Roth IRAs, and that you will still be taxed if you withdraw the funds early or before the account has aged 5 years, but some people find the ease of access comforting.

For some folks, however, a Roth-type account is not easily available or accessible to them.

Reasons For Penalty-Free Retirement Fund Withdrawals

If you find yourself in a situation where you do need to withdraw funds from your 401k or traditional IRA early, there are a few circumstances in which the 10% penalty might be waived. This doesn’t include items that deal with death or complete disablement. In that case, a penalty tax is not likely to be top of your concerns.

Keep in mind that although these exceptions may enable you to avoid the 10% penalty, you will still owe income tax on any premature IRA or 401k distributions. Also remember that these are broad outlines. Anyone wanting to tap retirement funds early should talk to their financial advisor.


You are allowed to take an IRA distribution for qualified higher education expenses, such as tuition, books, fees and supplies. This distribution is still subject to income tax, but there won’t be an additional penalty. For instance, if you want to go back to graduate school and you need the money, you can decide to tap your retirement fund for tuition. The rule also allows you to apply this exception to your spouse, children or their descendants. Keep in mind this is for IRAs, 401ks or other Qualified Plans are subject to a different ruleset.

Specifically, some 401k plans will allow what is called a “hardship withdrawal,” with education expenses sometimes falling under this clause. It is important to note here that expenses eligible for a hardship withdrawal will vary depending on your 401k plan administrator, so make sure you are aware of what will qualify under your specific plan. Some providers do not allow hardship withdrawals at all. You’ll also likely be charged the 10% fee for taking funds from your 401k early for most types of hardship withdrawals. There are a few exceptions, but education expenses are usually not one of them. Basically, hardship withdrawals mean you’re able to take money from your 401k before you reach age 59 ½, but most of the time you will still be hit with the penalty.

First-time home purchase:

You can take up to $10,000 out of your IRA penalty-free for a first-time home purchase. If you are married, your spouse can do the same – and “first-time home” is defined pretty loosely. For the purposes of the IRS, it is your first-time home if you have not had ownership interest in a home for the past two years. Just like the education exclusion, you can also tap this option for the benefit of your family. Your children, parents or other qualified relatives may receive the same $10,000 for their purchases, even if you’ve used this benefit for yourself previously or already own a home.

First-time home purchases or new builds may also be considered eligible for a “hardship withdrawal” from your 401k, but again, the 10% penalty will still likely apply here.

Medical expenses or insurance:

If you incur unreimbursed medical expenses that are greater than 10% of your adjusted gross income in that year, you are able to pay for them out of an IRA without incurring a penalty.

For a 401k withdrawal, if your unreimbursed medical expenses exceed 7.5% of your adjusted gross income for the year then the penalty will likely be waived.

Family Circumstances

If you are required by a court to provide funds to a divorced spouse, children, or dependents, the 10% penalty can be waived.

Series of Substantially Equal Payments:

If none of the above exceptions fit your individual circumstances, you can begin taking distributions from your IRA or 401k without penalty at any age before 59 ½ by taking a 72t early distribution. It is named for the tax code which describes it and allows you to take a series of specified payments every year. The amount of these payments is based on a calculation involving your current age and the size of your retirement account. Visit the IRS’ website for more ore details here.

The catch is that once you start, you have to continue taking the periodic payments for five years, or until you reach age 59 ½, whichever is longer. Also, you will not be allowed to take more or less than the calculated distribution, even if you no longer need the money. So be careful with this one!

What if you only need the money short term?

Although there are other qualifying exceptions to withdraw IRA or 401k assets penalty-free, those listed above are the major ones. But suppose you’re not interested in paying any taxes at all. You can still use your 401k to “borrow money” via a loan — the interest goes to you, the loan isn’t taxable, and it wouldn’t show up on your credit report. Here’s how it works:

401k loan:

The IRS allows you to borrow against your 401k, provided your employer permits it. It’s important to note that not all employer plans allow loans, and they are not required to do so. If your plan does allow loans, your employer will set the terms. The maximum loan amount permitted by the IRS is $50,000 or half of your 401k’s vested account balance, whichever is less. During the loan, you pay principle and interest to yourself at a couple points above the prime rate, which comes out of your paycheck on an after-tax basis. Generally, the maximum term is five years, but if you use the loan as a down-payment on a principal residence, it can be as long as 15 years. Sometimes, employers will require a minimum loan amount of $1,000.

The benefits of such a loan are obvious: you do not need a credit check, nothing appears on your credit report, and interest is paid to you instead of a bank or credit card company. The interest rates are usually lower than what you could receive elsewhere, and the paperwork is not complex.

Now the downsides: If you leave your leave your employer (or are fired), your loan is generally due right away, usually within 60 to 90 days. If you can’t pay it back, you will be assessed a penalty by the IRS. You are also not able to borrow from an old 401k plan — you can only borrow from a 401k if you are still working for the employer where that 401k resides. You are also not able to borrow from an IRA if you transferred your 401k funds to an IRA. Also, taking a 401k loan depletes your retirement principal and will cost you any compounding that your borrowed funds would have received.

IRA Rollover Bridge loan:

There is one final way to “borrow” from your 401k or IRA on a short-term basis, and that is to roll it over into a different IRA. You are allowed to do this once in a 12-month period. When you roll an account over, the money is not due into the new retirement account for 60 days. During that period, you can do whatever you want with the cash. However, if it’s not safely deposited in an IRA when time is up, the IRS will consider it an early distribution and you will be subject to penalties in the full amount. This is a risky move and is not generally recommended, but if you want an interest-free bridge loan and are sure you can pay it back, it’s an option.

Our Take

Even though there are a number of ways you can withdraw from your 401k or IRA penalty-free, we always recommend not touching your retirement savings until you are actually retired. Compounding is a huge help when it comes to maximizing your retirement savings and extending the life of your portfolio, and you lose out on that when you take early distributions. To see how much compounding can affect your 401k account balance, check out our article on the average 401k balance by age.

We understand that it’s always possible for unforeseen circumstances to arise before you reach retirement and being aware of the exceptions that exist can allow you to make informed decisions and possibly avoid paying extra fees and taxes.

Readers, have you ever tapped your retirement funds early for an emergency or one of the reasons above? 

To take control of your finances, a good place to start is by stepping back, getting organized, and looking at your money holistically. Personal Capital’s free financial tools will allow you to calculate your net worth, track all of your accounts in one place, make sophisticated projections for the success of your retirement plan, and more.

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The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.
Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

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  1. Anthony Wayne Carroll

    Wanting to use 401k to payoff house when I retire,I plann on retiring at 60,was wanting to go ahead and draw it out now at 53 but said I would have a 10%pentially,so if I wait until 59 1/2 yrs old I can draw the money out of 401k and payhouse off without a pentially

  2. Tamara Tustin

    Are you allowed to take a monthly, quarterly or annual distribution from your 401(K) at the age of 59 1/2 without penalty and is there a chart to show what the amount of the distribution can be? Once you start taking a distribution at the age of 59 1/2 do you have to keep taking it? Do you have to be retired to start taking a distribution, once you have reached 59 1/2?

  3. Richard Keller

    I know the $7K I withdrew is penalty/tax free due to my medical disability {dialysis}, but does that mean I should just not enter the 1099-R form from my investment company in my 2018 tax return at all?

  4. John Baker

    How can I with draw my 401k?

  5. William Hamilton

    I am 63 years old and need extensive oral surgery, implants and denture. Although I opted for the “platinum” dental plan where I work it is woefully inadequate, high deductible and copay. I am considering using 401k funds to pay the balance. What kind of fed tax would I have to pay on the withdrawal? Is there a break given for money’s used for medical care and is dental considered the same as a heart condition or cancer or would it be deemed “elective” surgery? I make about 30k a year. I see a lot of good questions on this site but not a lot of answers. Any helpful information would be greatly appreciated.

  6. Bruce LLoyd

    I am 64 and have not touched my 401,how do I withdraw funds ?

  7. Steve N.

    If I already had stock investment loss this year and I withdrew the same about from 401K, will it help with the tax situation? I knew that the 10% earlier penalty would still apply since this will be an earlier retirement withdraw.

  8. jim

    I have terminal cancer and want to take all my funds out of my 401k without any penalties. i am 62 years old at this time. Is there a way to get around state and federal taxes?

  9. Joanne

    If my employer terminates our 401k plan do I have to pay taxes on it if I am 62 ?

  10. Carlos

    Hi. I am moving out of the US, I am not an american citizen, my visa expires and I’m going back to my home country. Can I withdraw my 401k savings penalty and tax free?

    thank you!

  11. Antony Chavez

    Yes Matt,…..great advice, some I knew but I’m leaning towards pulling my money out of the banking system and investing it in gold maybe but silvr is currently attainable,……, I’m thinking of starting my own business as I jus left my Employer of 14 years to Change My Life,…………jus asking and God Bless you, Sir,…!

  12. Sharon Waters

    I was recently relieved of my job. Unemployment pay is not enough to pay my bills. Even though I am still job hunting I still have bills to pay. How long do I have to wait after being let go from job, to have my 401K distribute to me? I am not trying to get effected from home or my lights turn off.

  13. William Johnson

    I turned 59 June 26 of 2018. I anticipate that I will owe IRS nearly 20 thousand when my accountant completes my takes by mid fall. I will likely have to go on payment plan with IRS which involves high interest and penalties.
    I have maxed out what I can borrow from my 401k. I have multiple retirement accounts with my employer and same employer for 24 years.
    Will I have option of withdrawal of money from one of my retirement accounts despite maxed out on loan from 401k? I have two 403B accounts, one 401k, and one 457B account. Total of all accounts combined = $1,160,000.
    I will be 59.5 December 26, 2018.
    What option do I have for paying IRS debt?

  14. John

    I just turned 62 last month and I need money to pay off some medical bills and to pay back my wife for other expenses is it advisable to withdraw from my IRA or Roth?

  15. TLJ

    Why would my ancestors be interested in my 401K? Did you mean descendants?

  16. Phoebe

    Hard to agree with this — I mean, no one likes taxes, but you pay them on income at one time or another. You have to pay them on your 401k withdrawals because you never paid taxes on that money in the first place. You’d have paid more in taxes before if you weren’t contributing to your traditional IRA, or if you were putting money into a Roth instead.

  17. David

    Hi Matt,
    I had about 120k in a 401k. I left the company and left my money where it was until I got a new job. However I developed epilepsy.

    Years later I rolled 75k of the 401k into a crypto-
    Currency 401.
    The way it works is they charge you a 10% fee
    For the roll over and $500 for each crypto you
    Invest in.

    It seems like a lot…. however i had a job and degree in technology CIS.
    I felt real good about this investment.

    After that I moved another 20k w/ a 60 day roll over. Most of the $ is in a crypto that I think will
    Shoot up in the next 3 years.

    I read what you wrote above and see the exceptions for early withdrawal.

    However let’s say it shot up to 20 Million.
    What could I do with out loosing a third of it.

    The only think I was thinking of was to take out and additional 15k from my original 401k.
    Pay the penalty and taxes on that.
    Then invest the remainder of the funds out side of the crypto 401.

    Unless there are better options?

  18. Fred Gnuechtel

    My wife and I have our own IRA accounts and a joint account. We file taxes jointly. We took a rollover loan out on my wifes IRA for a down payment on a new home. It now looks like it will be 75 days before we close on selling our old home. My question is – can I take out a rollover loan on my IRA acc to pay back my wifes – and then pay my load off when we close?

  19. Derek

    I’m on an E3 Visa. Is there anyway of taking it out penalty free because of this. Currently heading backroads Australia.

  20. JG

    We took out a large sum of money out of my husbands 401k to pay for my college, my sons college and hospital bills and living expenses because my husband had to have neck surgery all in one year. We ended up owing 50 thousand for taxes and penalities. We are paying monthly to IRS is there a way to see if we can get the penalities taken away? We told our accountant all this when we took the money out but he never mentioned not paying penalty.

  21. Tamara Andrew

    I will turn 59 in December. I recently moved across country. Have only been able to find temporary work. My savings is dwindling and I need to access my retirement funds to live on until I can find full-time employment. I have a 401A and a 403B and am fully vested after working for an organization for nearly 13 years. I’m trying to wait until I am 59.5, but don’t think that is going to work. Please help me better understand my options.

  22. Will McMinoway

    What are your thoughts on cashing in a 401K in order to buy a house? Little background: I’m retired at the age of 47. I was retired on a medical disability. I’m wanting to buy my “retirement dream home” but the only way I would be able to afford it would be to cash in my 401K. The reason I am considering this is because I want to continue to live debt free. My current house is paid for but I live in the city. The home I am looking at is worth approximately $150,000 more than my current home (it is a country home with roughly 35 acres). Would the money I saved on interest I would pay over the next 30 years on the house loan going to be enough to offset the penalties of early withdrawal? Thanks for your time, Will

    • Peter

      I don’t think there is any penalty on withdrawals if you are medically disabled and receiving social security disability benefits.

  23. Chari

    Can i withdraw 401(K) when i move to my home country but still working with the same of company of United States. it’s foreign entity of US company

  24. Patricia

    Hi Matt
    I retired early age 52 due to Stage 4 Cancer. I want to withdraw my money to pay my bills. Any comments.

  25. Linda

    I was early retired a month ago, at 60 due to a stroke- (3 1/2 years ago). When I start withdrawing out of my 401K, Can I have the taxes taken out as I take some out. I plan on filing for disability asap.

  26. Barbara Dasher

    At what age do I have to remove money from my IRA and 401k account and what form do I use ? I would appreciate any information on this matter.

  27. Kim

    My job closed in 2005 I was in the Walt Disney Pension I haven’t touch none of the money will my money gain interest. I was invested in a 100%.

  28. Rahmir Jones

    I need info on how ro access my 401k for a hardship situation. Dont need all of my 401,just enough to help.

  29. Linda Skrzypiec

    I am 61, recently divorced and will be getting half of my ex-husbands 401K. Can I take out 50,000 for debt consolidation, Attorney fees and to buy a small house? My rent and utilities are costing me over $1500, not counting other expenses. My spousal support leaves me short by the end of each month

  30. Lesa

    I am 55 and I am on disability Social Security. I am going to have to move from my home. Is there anyway I can pull money out of my 401K without penalty? As I truly need money to put down on a home.

  31. Wendy

    Hi Matt,
    I recently went through a divorce and I incurred all the debit (mortgage, car note and attorney fees). I will be getting half of the my ex’s retirement from his 401k, IRA and pension. I’m 46 years old and have all this debit can I use any of the retirement I get from him to pay any of these debts off? I know in a perfect situation I would want to just roll it over but I don’t make nearly enough at my job to let the money work for me when I have 3 huge debts over my head, and I’m doing good to stay current on all debts, I just need some relief so I can start getting some sleep again, but I want to be smart it seems like so far I haven’t done one thing right and I’m tired of making the attorney’s and the IRS richer, by giving them money for not doing anything to help me -it’s frustrating and Im at a complete loss as to what to do with money I get.

  32. sasank

    If you take a distribution from an IRA or a 401k before the age of 59 ½, you’re assessed a 10% penalty tax in addition to any other taxes you owe.

    Example: If I contribute $3000 per year towards 401K. After 3 years if I withdraw the amount by pay 10% penalty , would I have to pay any tax again?

  33. Saif

    The extra charges of a government on the residence in the form of general country tax can be eliminate easily with in a seven days according to the rules and regulations of a government,If you write an application with the authentic reasons for a elimination of residence tax and also attached a legal documents of a residence tax pair after that submitted in the government office by the residence tax layers which is helpful for your tax layer to approved the claim of your residence tax in the seven days without any allegations of a government on the application of your residence tax ,Remember don’t write any irreverent reasons in the applications of residence tax you want to submit in the office of government and also don’t attached any illegal or extra document of residence tax which increase the chances to refuse or neglect your claim application ,So keep it in your mind all the instructions and requirements given to you by the tax layer after concerning this kind of matter according to the current policy of government .
    Thanks .

  34. Evelyn

    The company I work for is firing us and another company is taking over and hiring us. I am 58 years old. If I take my 401k will I be penalized? If I transfer it to the new company will I be penalized if I take it when I am 59 1/2.

    • JuliaB

      If you withdraw the money completely, you will pay the 10% plus taxes. I roll all my 401k money when I switch jobs to an IRA. Most of my money is with Vanguard. My company was just bought out a couple of months ago, and I had the option of rolling it over to the new company. Instead, I moved it to Vanguard. That was it’s more in my control.

      If you have over 50K total invested with them, they waive many of their fees.

  35. Kay welch

    I have a 401k am retired from Wal-Mart how can I get my money without paying a penalty

  36. LD

    Hi, I am considering withdrawing most of my retirement funds to develop some property that I will lease out to some businesses. Does this sound crazy? I was actually googling to see if there was a loophole for business growth when I found your article, it is very informative, thank you.
    Long term, I wonder if the slow steady that will eventually catch up to what I took out is riskier than the decent growth (actully great) I’ve had with stock investments.

    • Julia

      You might want to look into a self directed IRA. I use The Entrust Group and they have a lot of educational info on their site. You can invest in real estate and other things, but I believe you may have to be a passive investor. I’m not quite sure of the restrictions since my investments are in a real estate syndication.

      I also have some money invested through (formerly SDIRA, Inc) Strata Trust with the Lending Club. I chose Entrust for my other 2 real estate investments due to their fee structure which sited my needs better.

  37. Todd

    I retired at age 55 , can I put part of my 401k ollover into a single premium immediate annuity that will give me income for the next five years without the 10% penalty and defer the rest for later distribution ?

  38. S H

    My employer doesn’t allow outside contributions from another source.
    Is there a way to start a Roth IRA using Bit Coins ?
    Thank you kindly for any help. S.

    • Jamie Balkin

      Hi there – thanks for reaching out! While holding bitcoin in an IRA has technically been possible since IRS Notice 2014-2 (which declared bitcoin property for tax purposes), the process remains complicated and fraught with liabilities. We would not personally recommend going down this path. I would suggest reaching out to an advisor for alternative options.

  39. K. Murthy

    i am 66 and 67 this november 17. i would like to take out some of my 401K and or IRA for purchase of a house. will i pay penalty and or taxes at regular rate. Do i have some of the must take outs each year not sure 4 % or more and still would i have to pay taxes for that amount. At what age i should start taking out and what percentage. i am still fully employed and pay taxes. did not draw my SS yet. Any help and tips or suggestions so i dont lose i saved.

    • Jamie Balkin

      Hi there, please make an appointment with one of advisors through the platform. They will be able to answer all of your questions regarding your 401k and IRA. Thanks!

  40. Platinum Accounting

    You shared excellent information on about calculating the tax returns of a successful business easily by using online system software , I read this post and remember the best points especially ” customer service management ” mentioned in this article which help me for running a business successfully with the help of professional accounting .If you want to start a business successfully then you must read this article carefully and keep it in your mind all the best points of a great article which help you to running a business successfully with the professional accountant .

  41. kesava murthy

    I am 66 and 67 in November. I have 401K and IRA through my job. How much i can withdraw without penalty and i think i have to pay taxes on whatever i withdraw right. There is a 4% or some such rule by IRS to must withdraw after certain age. Am i in that bracket now. How much each year and how long and if i am still working and contributing and taking tax deduction for my withdrawals per month what implications and what to look for . Also I am withdrawing 10% or less from IRA for my primary home purchase. This is not my first home but my wifes first home. Any help is appreciated.

  42. Robert Tippett

    I am 61 1/2 is there anyway I can withdraw my 401k to keep my home out of foreclosure without paying a penalty ?

  43. Teresa

    I’m 68 and just retired. I have 54000.00 in my 401K. My disabled son is going through divorce and needs money to keep the house. He needs house to keep his medical trained pet due to his seizures. I don’t think I would pay penalty to take money out. Is investing this money in a home with my name and sons name wise?

  44. John K

    One of the most obnoxious features of 401ks is that they are taxed. I was in the same situation as Matt, namely there was no Roth IRA in existence when I first started saving and I just never got around to doing the Roth because I was already near retirement and somehow it the Roth IRA conversion seemed very punitive to me — take a hit on say $200k?? Are you crazy? So now I have to look forward to being taxed on any future IRA withdrawal. Thanks Uncle Sam!


    I’m 65 going on 66 still working, I want to take money out of my,.401 k to pay off my debt credit cards is this possible?

  46. Kimball Olsen

    my daughter has a 401k from her former company and wants to use it for a down payment on a condo what is the penaty amount or is there other form of making it go away

  47. Donna

    I need to know what type of retirement plan I should have the attorneys set up for me. I am only awarded $35,000 and will have to take a huge amount out immediately for survival purposses. I’m 63 Yrs. Thanks Donna

  48. Leamon R

    At 59.5 I’ll still owe about $10,000 on a loan from 401K and about $3500 on another. Could I stop paying on the $10000 loan and just consider it a withdrawal & pay taxes on it without penalty & just keep up payments in the $3500? Thanks

  49. Barbara H

    I Understand that we are allowed to request a hardship withdrawal to purchase our primary residence, but if we take this Hardship loan now, and lets say something unexpected happens in a year or 2 later, where we needed to take another hardship withdrawal. Is that allowed? How often or how long do we have to wait until we are able to do another Hardship withdrawal from 401k?

  50. Allison Inemer

    I was at my job for 13 years. I’m 54 years old. Last year, I went through a divorce, purchased a home (first time) and borrowed $40,000 from my 401k for the down payment. One month later, the company laid me off, telling me they were downsizing. I immediately worked out a payment plan and continued paying on my loan. However, once I received a permanent job offer, I rolled my 401k funds from my former employer’s fund to my new employer’s fund, and they deducted the loan amount that I took for the down payment. Now, I’m anticipating being hit with a 10% penalty plus taxes on the $40,000, (as if going through a divorce and losing my job wasn’t enough). I did not act in any negligent way. Are there any loopholes for not having to pay all those taxes and penalties? I acted responsibly by purchasing a home – not wrecklessly. Thanks for your advice.

  51. Gladys Mullins

    I turned 59 on August 17, 2016 when can I start drawing from my 401k without any penalty? And are the tax you pay the tax bracket you fall in or is it different?

    • Tamar Kuyumjian

      If you are still working, you can start withdrawing at 59.5 (so late February of next year) without a 10% penalty. However, if it is an active 401k plan (meaning you still work at the company), you need to check with HR first as some companies allow for “in-service” withdrawals and some do not (they make you wait until you leave). If you retired after age 55, you are allowed to withdraw penalty free before 59.5 as long as you did indeed retire after 55 and you have not rolled the funds into an IRA. All money taken withdrawn from traditional 401k plans is taxed as ordinary income and falls into whatever bracket(s) that works out to.

      • marcia

        Hello! I’m looking at retiring at age 55.5, which will be March of 2026 I was wondering if this would still be true at that time. About being able to withdrawal from my 401k without penalty before 59.5.

  52. Anonymous

    Hi I wanted to know if I can borrow money to purchase a new house .first time home owner here..and I have Roth not 401

  53. Delys Thomas

    I am only 53 years of age. I am practically almost Homeless. Can I do a short term loan on my IRA? What is the penalty? And how much tme will I have to pay it back

  54. mason carlton

    After being in relationship for 8 years,my husband broke up
    with me all was in
    vain, I wanted him back so much because of the love I have for him, I
    begged him with everything, I made promises but he refused. I
    explained my problem to someone online and she suggested that I should
    rather contact a spell caster that could help me cast a spell to bring
    him back but I am the type that never believed in spell, I had no
    choice than to try it, I emailed the spell caster, and he told me there
    was no problem that everything will be okay before seven days, that my
    ex will return to me before seven days, he cast the spell and
    surprisingly in the six day, it was around 4pm. My ex called me, I
    was so surprised, I answered the call and all he said was that he was
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  55. Raymond Pietrogiacomo

    I am 62 yrs.old.Can I pull some money out of my 401k plan without being penalized?

    • Anonymous


      • Debbie

        How much% of taxes would be owed if I’m 62 and draw money from my 401k

  56. Douglas

    I am 63 and interested in knowing if I can do the 401k loan withdrawal from a 401k of a previous employer that has been turned over to my management?

  57. harshad

    I am 69 when and how much money can I withdraw fro my IRA/401K ?

  58. Alba

    I have been with present employer for a year and a half…so contributions in 401k are very small. I took a small loan of $1500…paid fee of $125 so loan is actually $1375 …and agreed to pay it back over 5 years, with payment to come straight out of my salary. THEN my employer told all staff we were going to be taken over by another management company mid-December this year. Trouble is, this new employer doesn’t offer a 401k. I understand that the amount still in my 401k with old employer will just stay there and accumulate any interest…but what happens about the loan I took from my 401k? Will I be able to make a monthly payment plan with the company where the 401k is based, so that I don’t have to pay any penalties and taxes? I am 68 years old and working full-time.

  59. Clarence Snyder

    Thank you for all of the information on 401K’s, IRA’S etc. I have a question for you that kinda takes a left turn from all of that though. 5 years ago I was relieved of my job with a food distribution company that I have worked with for 3 years and during that time I had invested over $3,000 into a 401k. I have never asked nor have I ever received information about my investment what I can do with it what I need to do with it ,

    • Clarence Snyder

      I’m actually just curious if that money I invested is still mine, I am assuming that what I invested is still mine but I would like to know how to go about claiming it, transferring it, investing it, whatever I need to do. Thank you.

  60. Tamara

    Can I withdraw from my 401k without being penalized to pay beck Irs taxes

  61. bob byman

    Hi, if i am under the age of 59.5 and withdrawing from my ira do i have to pay the addit. 10% tax penalty if i take a distribution and use it for a pre paid tuition plan, ie florida pre paid. My daughter is only 2 and won’t be using the $ for another 16 years but i want to take advantage of pre paying for the tuition now and I have money that i can take out of my ira now to pay for this expense and it will be eventually used for tuition. Very confusing b/c I am not using the money for tuition this year but I will be paying the tuition via florida pre paid for college this year.

  62. Lori Smith

    I have an IRA account. I will be 61 in Feb 2016. I am a widow on SSDI I own my home. However there are some things that I need to do to maintain the upkeep of my home. I want to withdraw 5,0000.00 .Is there only certain times a year when this can be done? I think I am allowed 4,100.00 tax free how much tax will I owe? Should I have them pretax me so I don’t have to worry about at tax time? What else is important that I need to know before doing this?
    Please answer promptly.

    Thank You.

  63. joseph illery

    let me know the phone number to call for a loan ftom my pension

  64. josep illery

    i will be 60 in october i am on social security disabitlity my car was impound last month can i get a loan from retirement i work on the job for 18 years and was laid off in 2003 then i apply for social security in 2005. can i get some help from somebody.

  65. Lisa

    I have a 401k. I am 52 years old. All I have is $20,000. How much money will be held back if I cash it in. I have exhausted my unemployment. I have no idea what to do. Help me please!

  66. Anonymous

    If you are mpsing your home due to job lose and hardship can you take out 4401k without penalty to be able to pay it off. If not i might be homeless

  67. Natasha

    Hi my fiance was at his previous job 16yrs he a
    Has a 401k n penision they say he has to wait for 1 year but we have ran into emergency critical situations and need $$ bad. How and is there any way through whoever or however to get some of his $$???

  68. Katie

    I will be attending law school in the Fall and I’m in need of outside funding until my student loans kick in. I have a 401k through my current company. I will no longer be employed once I start school. The company stated that there will not be any penalty for complete withdraw once I’m terminated from the company. I’m not sure if I should borrow the entire amount from my 401k OR just close it completely… (I have a state 401k that I will leave open). Also, do I just provide documentation come tax time that I used the funds for school?

  69. Mary

    Hi, I am turning 60 next month, My Mom passed away in May. Can I take the IRA without penalty? I have no income as I cared for my Mom 24/7 for 8 years. She did leave me half of her home in 2009, then last Nov left the other half to me and my Husband. The half that she left us is assessed at $50,000 . My husband is disabled and is retired collecting social security. I basically have no income. Thank you in advance for your help! Mary

    • Myra Cheek

      I am now 67.5 yrs old. Can is draw my money from my 401K to purchase a home without penalty?

      • Steve H.

        You shouldn’t even buy green bananas.

  70. Anonymous

    Matt, I am turning 60 on July 2. My Mom has passed away in May and left me her IRA, so can I take this without tax penalty?

  71. stephen krage

    i am retired and took a distribution from my ira in the calendar year i turned 59 1/2 but before the actual date i turned 59 1/2. is that distribution subject to the 10% penalty?

    • Anonymous


    • mike

      was this answered ? seems like years ago it was ok without 10% penalty to take out money
      in the year you reached 59.5 even if you had not reached the actual 59.5

      for example if i am 59.5 on june 10th in 2016, i can take out ira with no penalty in 2016 – thats how the irs rules used to read, i think

      now, it’s not until after reaching 59.5 in actuality – so june 8th 2016 I would pay the 10% (if no exceptions) and on june 11th 2016 I would not pay the 10% is that how it works now?

  72. doris a overton

    Why would disability and soc sec funds be reported as taxable incoome?

  73. Christopher Carriero

    Matt, am I able to borrow from my IRA to purchase a new home with no penalty or interest?

    Thsnks, Christopher

  74. Frank Peng

    I enjoy reading your posts. One think you didn’t mention is that, for Roth 401k, if you leave your current job after 55, you can withdraw the money without any penalty.

    • anthony

      actually no penalty on traditional 401 k also if you started the 401 k you are leaving and did not rollover any money into it from another job

  75. Michael David Thomas

    Handsome *and* smart, you are truly a “dual-threat”. This is great information, keep up the blogging!

  76. Jim

    How does the early withdraw apply to the ROTH 401k? If I contribute to a Roth 401k and roll it over to a Roth IRA can I take the contributed funds out as long as they have been in the Roth IRA for 5 years? Or does the contribution apply to the year you contributed to the Roth 401k?

  77. Financial Samurai

    Good post Matt. The biggest concern I’ve noticed is that there seems to always be an emergency for folks who start withdrawing from their 401k or IRA for something. Better to make it like the Singapore or Australia system. Those guys retire with much greater sums of money due to better contributions from the employer/gov’t and more difficulty in withdrawing.

    • Julia

      Good Article Matt, thanks- I’ve learned a few things/prior to 59.5 yr old wdwls! So, I’m sharing and hoping that someone might benefit. At FS ~Yes, I did all the right things: 401K, IRAs, emergency savings, no car payments, no credit cards debt, etc,,, However, a drastic financial change like a (Forced) VRP – voluntary resignation program/Buy Out Offer~ where, you’re damned if you do and 2x damned if you don’t because…. I was (sultry) threaten with lay-off w/No Severance and loss of pension if I chanced the laid off!
      Now, the rock and hard place decision ~ I accepted and signed on the dotted line at 52 yr (female) w/ a “bridge” guaranteed Emp for 1yr ‘tiill 53.5 yrs old on 6/2010 – it helped that I’m a new year’s baby! I received 19 months of weekly severance w/paid med insurance (I put in 32 yrs) but, they never told me – not for lack of asking – how much my pension will be and my retiree medical ins (self+1).

      Well, thank God that I was sitting down, when they gave me the figure, I almost Passed Out! The Bastards Knew that this sum is a only a little over 1/3 of my prev and I has to pay $350 med Ins! I ended up having to take the SSI Option in order to have a semblance of income for living exp. I was still about $1,000 short! So, after I exhausted all expense cuttings, sold my gold jewelry $8K -luckily Gold was $1600 an oz., FOUGHT 2 Major Bank Sharks and WonL CHASE $39K/Settlement $5.9K, WFC/Refi from $1124 to $748. I Had to TAP into my Personal ROTH IRA to pay Chase $5,900 for a $39,000 equity loan balance and cut $416 of my Monthlies ~ I think that was a very good reason.

      Note: I got an IRS notice in 6/2014 that I was being AUDITED for 2012 because of IRA/Roth early witdwl and that I owed $2,800 -by the rules “you can withdraw the Roth IRA contributions/Principal anytime without Penalty.” Well, I contributed $6K and I withdrew $5K in that 2012 year. THERE IS NO BOX ON THE 1099 Form THAT CAN BE CHECKED TO REFLECT CONTRIBUTION / PRINCIPAL WDWL. Instead, there’s a box that says EARLY WITHDRAWAL that’s the one the Financial Institution checks ~ I had used TURBO TAX 2012 and with all the stupid questions not one handled the IRA wdwl and tried as I may to enter the correct figures, it piled the IRA money on top of my regular taxable income for FED & STATE(found out in 2014) ; Although I omitted the IRA $ on the FED return, Turbo TAX had automatically added it to my STATE causing me to Pay about $850 that was not due! Since it was withdrawal of contributions– KEEP ALL YOUR ROTH and any other Contributions RECORDS. After filing an AMENDED Return -with the Competitor, the $850 was due to FED and STATE had to Refund me $590.

      • me

        At least you got severance pay.

  78. Donna

    Hi Matt, you’re a “gem”‘ the information provided is invaluable.
    Can you borrow from Roth IRA to pay student loans? Thanks Donna

    • JT

      You cannot borrow from an IRA. This is a feature of a 401K. However, even if you could, paying student loans would be a poor reason to access that money. Student loans are low interest debt, usually lower interest than the stock market produces. Taking money out of an account that pays you 8% interest to pay an account that charges 6% interest does not make sense. If these are not federal student loans you might have higher interest rates, but it is still unlikely that you will improve your financial situation by using retirement accounts to pay of student debt.

      • Mandie

        I had the same question, thanks for explaining it so clearly!

    • Margaret George

      I’m 52 old ,I borrowed 16,000 to pay off my son school tuition from my 401k 3 months ago then I recently resigned from my job and I just took another 8000. What would the penalties be? Help I don’t know what to do

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