Withdrawing from your 401(k) can give you flexibility, but it can also create unnecessary taxes and penalties if you don’t follow the rules. In 2026, most early withdrawals still trigger ordinary income taxes plus a 10% early withdrawal penalty, unless you qualify for the Rule of 55, a hardship withdrawal, or other limited exceptions. This guide breaks down when you can withdraw, how to withdraw, what qualifies for penalty-free access, and how a plan-led wealth strategy can support your long-term planning.

4 Key Considerations When Withdrawing From Your 401(k)

Your 401(k) may represent decades of disciplined saving. Knowing when and how to access it—without sacrificing long-term growth or triggering unnecessary taxes—is essential.

Thinking about taking a distribution? Our advisors, supported by our Roundtable™ of specialists, can help you evaluate withdrawal strategies as part of a comprehensive financial plan.

What Is a 401(k)?

A 401(k) is an employer-sponsored retirement plan that allows you to save pre-tax or Roth after-tax dollars, with tax-advantaged growth until you withdraw the money. Withdrawals are taxed based on how the account was funded. For more information on retirement planning, check out “Your Complete Guide to Retirement Planning.”

What Is the 401(k) Early Withdrawal Penalty?

If you withdraw from your 401k before age 59½, the IRS typically charges:

• Ordinary income taxes, plus

• A 10% early withdrawal penalty

This penalty applies unless you qualify for an exception such as a hardship withdrawal, Rule of 55, or other IRS-approved situations. For more details on qualifying situations, read “Hardships, early withdrawals and loans” from the IRS.

What Age Can You Withdraw From Your 401(k) Without Penalty?

For most individuals, the threshold is age 59½.

However, you may qualify for earlier access—most notably the Rule of 55.

1. The Rule of 55: Withdraw From Your 401(k) at Age 55 Without Penalty

The Rule of 55 allows you to withdraw from your 401(k) penalty-free starting in the year you turn 55, provided:

• You separate from the employer sponsoring the plan during or after the year you turn 55.

• You withdraw funds directly from that employer’s 401(k) plan.

This rule also applies to 403(a) and 403(b) accounts, and certain public safety employees may qualify as early as age 50.

Rolling funds into an IRA eliminates Rule of 55 eligibility. Confirm your strategy before making any moves.

2. The Reason You Left Employment Doesn’t Matter

To qualify for the Rule of 55, the reason for your separation—quit, laid off, terminated—does not matter.

If your employment ends in or after the year you turn 55, you may access that plan without penalty, even if you take a new job elsewhere.

3. Only the 401(k) From the Employer You Left Is Eligible

The Rule of 55 applies only to the plan administered by the employer you separated from.

You cannot use this rule to withdraw penalty-free from:

• IRAs

• Old 401(k) plans you previously rolled over

• New employer retirement plans

If you anticipate needing access between ages 55 and 59½, consider leaving the funds in the eligible plan.

4. The Rule of 55 Applies to When You Leave—Not When You Withdraw

If you left your employer before the calendar year you turned 55, the Rule of 55 does not apply—even if you wait until 55 or later to withdraw.

Hardship Withdrawal From 401(k): What Qualifies?

A hardship withdrawal may allow early access if you face an “immediate and heavy financial need.” The IRS recognizes several categories:

• Medical expenses

• Costs of purchasing a primary residence

• Tuition and educational fees

• Preventing eviction or foreclosure

• Funeral expenses

• Certain casualty losses

Hardship withdrawals may avoid penalties in limited cases, but they remain taxable income. Your plan administrator will require documentation and employers may also have additional requirements.

If You’re Converting Your 401k to an IRA

Rolling your 401k into an IRA may improve investment flexibility—but you lose the ability to withdraw penalty-free under the Rule of 55.

If you expect to need the funds before age 59½, delaying a rollover may be beneficial.

How Much Tax Will You Pay If You Withdraw Your 401k?

Taxes depend on your account type:

Is It Ever a Good Idea to Withdraw From Your 401(k)?

In some cases, yes:

• You need penalty-free access under the Rule of 55

• You face a qualifying hardship

• You are incorporating withdrawals into a retirement income plan

But in many situations, early withdrawals reduce long-term growth. A thoughtful withdrawal strategy is most effective when grounded in your overall financial plan. Our advisors can help clarify the right path for you.

The Bottom Line

Withdrawing from your 401k requires understanding penalties, taxes, exceptions, and long-term implications. Whether you’re evaluating the Rule of 55, a hardship withdrawal, or a pre-retirement transition, the goal is to keep decisions aligned with your financial life.

Request a meeting with one of our advisors to explore a plan-led approach tailored to your goals.

FAQs: Withdrawing From Your 401(k) (2026 Edition)

Can you withdraw money from your 401k at any time?

Yes. However, early withdrawals before 59½ typically trigger taxes and a 10% penalty unless an exception applies.

What qualifies for a 401(k) hardship withdrawal?

Medical costs, home-purchase expenses, tuition, funeral expenses, eviction prevention, and certain casualty losses.

When can I withdraw from my 401(k) without penalty?

At 59½, or as early as 55 under the Rule of 55.

How can you withdraw from your 401(k)?

Options include:

• Standard distributions

• Rule of 55 withdrawals

• Hardship withdrawals

• Required minimum distributions

• Rollovers

What is the new rule for 401(k) withdrawals in 2026?

The core rules remain consistent: withdrawals before 59½ may incur penalties unless an exception applies.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

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