401k Withdrawal Rules

So you’re interested in learning about the various 401k withdrawal rules?

Well, you’re certainly not alone. Aside from 401k loans, the questions that retirement professionals get most revolve around taking money in the form of a withdrawal from their 401k plan.

It’s really no surprise either when you think about it. You’re locking your money away in a “heavily guarded” account for retirement purposes (which is likely quite a distance into the future) and it’s only natural to try and tap the funds when the need for some quick cash arises.

Maybe you’re thinking, “Why would I want to put my money into something that I don’t have ready access to?”

That’s a good, valid question. And one worth examining before you decide to invest in an employer-sponsored plan. But remember, you are investing for retirement.

This is not a short-term savings account and should not be treated like one.

Uncle Sam has given you substantial tax breaks with the stipulation that you can’t tap the account for any old reason.


You may have some good options for a 401k withdrawal, or you may not. As usual there are different factors that could determine what you may have available, not the least of which is the type of 401k withdrawal rules your employer has established.

In this section of the site we’re going to look at a few of the most common types of ways to take money from your 401k while you are still employed (in-service withdrawals). We’ll go through each of these, but just keep in mind that you will almost always pay a 10% early withdrawal penalty if you take money from your 401k prior to age 59 .5 months.

We’re going to look at some voluntary types of 401k withdrawals such as after-tax withdrawals, rollover withdrawals, age 59 ½ withdrawals, and the most popular of all, the hardship withdrawal.

We’ll also take a look at some involuntary types of withdrawals such as Qualified Domestic Relations Orders (QDRO’s) and Required Minimum Distributions.