Different rules apply at different ages when it comes to being able to access your 401(k) without penalties. The younger your age, the fewer options you have, especially 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 that you have income when you retire.
Withdrawing From Your 401(k) Before Age 55
You have two options if you're younger than age 55, and if you still work for the company that manages your 401(k) plan. This assumes that these 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.
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.
Think twice about cashing out. You'll lose valuable creditor protection that stays in place when you keep the funds in your 401(k) plan. You could also be subject to a tax penalty, depending on why you're taking the money.
Withdrawing Funds Between Ages 55 and 59 1/2
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 leave your funds in the 401(k) plan to access them penalty-free. But there are a few exceptions to this rule. This option makes funds accessible as early as age 50 for many police officers, firefighters and EMTs.
Review the rules governing this age-55 liquidity rule before tapping into your account.
The age 55 rule won't apply if you retire in the year before you reach age 55. Your withdrawal would be subject to a 10% early withdrawal penalty tax in this case.
You might retire at age 54, thinking that you can access funds penalty-free in one year. It doesn't work that way. You must wait one more year to retire for this age rule to take effect.
The age 55 retirement rule won't apply if you roll your 401(k) plan over to an IRA. The earliest age at which you can withdraw funds from a traditional IRA account without a penalty tax is 59. 1/2.
Withdrawing From Age 59 1/2 to Age 72
Access to your 401(k) funds after age 59 1/2 depends on whether you're still working.
Have You Retired?
You can access your funds at age 59 1/2 without paying an early-withdrawal penalty if you're retired and you ended your employment after you reached age 55. You must still have funds in your plan. The rules are the same if you've rolled your 401(k) funds into an IRA. Age 59 1/2 is the earliest you can withdraw funds from an IRA account and pay no penalty tax.
Are You Still Working?
You can access funds from an old 401(k) plan after you reach age 59 1/2 if you're still working, but you may not have the same access to the funds at the company for which you currently work if you've changed jobs.
Check with your 401(k) plan administrator to find out whether your plan allows what's referred to as an “in-service” distribution at age 59 1/2. Some 401(k) plans allow this, but others don't.
Required Minimum Distributions
Required minimum distributions (RMDs) start at age 72 as of 2021. You must generally begin taking distributions from all your tax-deferred retirement plans, like IRAs and 401(k)s, when you reach that age.
You must take your first RMD by April 1 of the year after you reach 72 if you turned 70 1/2 in 2020 or later.
Your plan might offer an exception to these mandatory distribution rules if you're still employed by the company that manages your 401(k). You can't be an owner of the business. Check with your plan administrator to find out whether they allow an exception to the required minimum distribution rules if you're still working at age 72.