Terms of Use

Generally yes, you will be assessed a 10% penalty if you withdraw funds from your 401(k) plan before the age of 59-1/2. 

There are situations where the IRS will waive the 10% early withdrawal penalty on a 401(k):

  • Medical Expenses:  If your un-reimbursed medical costs exceed 10% of your adjusted gross income
  • Court Mandates:  If a court has ordered you to pay a former spouse, child or dependent from your 401(k)
  • Substantially Equal Periodic Payments:  If you take at least five substantially equal periodic payments (SEPPs), and the amount of the payments depend on your life expectancy as calculated through IRS-approved method, also known as a Section 72(t) retirement distribution
  • Permanent Disability:  If you become totally disabled.
  • Military Reserve Duty:  If you are a qualified reservist and are called to active duty for 180 days or more
  • Rule of 55:  If you leave your job at 55 or older and the company is sponsoring your 401(k)  
  • Rollover to Qualified Retirement Accounts:  If you rollover your 401(k) funds into another tax advantaged retirement account

Consider this:  a $10,000 early withdrawal will cost you $1,000 in penalties + you'll owe taxes if the funds were in a Traditional 401(k).