Can I Withdraw Money From My Retirement Account?

You can withdraw money from a retirement account at any age, but if you’re under 59½ the IRS generally adds a 10% penalty on top of the income tax you already owe. After 59½ the penalty goes away. Before that age, a specific set of exceptions can waive the penalty, and Roth IRA owners have more room to maneuver than most people realize.

The 10% Penalty and When It Disappears

The core rule: pulling money from a qualified retirement plan or IRA before 59½ triggers a 10% additional federal tax on the distribution, layered on top of ordinary income tax.¹ Reach 59½ and the penalty vanishes. Income tax on Traditional balances still applies.²

There’s an earlier off-ramp for people leaving a job. If you separate from your employer during or after the calendar year you turn 55, you can take penalty-free distributions from that employer’s plan. This “Rule of 55” applies only to the plan tied to the job you left. Old 401(k)s from previous employers don’t qualify, and IRAs don’t qualify at all. Public safety employees of state or local governments get the same treatment starting at 50.²

What You’ll Actually Pay in Tax

Traditional 401(k) and Traditional IRA money went in before taxes, so every dollar out is ordinary income. Take $20,000 from a Traditional IRA and $20,000 gets added to your taxable income for the year at your marginal rate. State income tax may apply on top.

Roth accounts flip the timing. You paid tax on the contributions already, so qualified distributions come out tax-free, earnings included. A distribution qualifies when your Roth has been open at least five tax years and you’ve reached 59½ (or the withdrawal follows disability or death).³ Pull Roth earnings before meeting both, and those earnings are taxable and can face the 10% penalty.

Roth IRA Contributions Come Out Anytime

One feature worth pausing on: your Roth IRA contributions can be withdrawn at any age, for any reason, with no tax and no penalty. The tax code orders Roth IRA distributions by category, contributions first, then conversions, and only after those are gone does the money come out of earnings.⁴

Say you’re 35 and have contributed $40,000 to a Roth IRA over the years, and the balance has grown to $55,000. You can pull out up to $40,000 with no tax and no penalty. Only the $15,000 of earnings faces restrictions. This ordering rule is specific to Roth IRAs. Designated Roth accounts inside a 401(k) don’t offer the same contribution-first treatment.

Penalty-Free Exceptions Before 59½

Federal law lists several situations where the 10% penalty is waived. Some apply to both IRAs and employer plans, some to only one. In every case, Traditional-account distributions are still taxed as ordinary income; the exception affects the penalty, not the tax.

Available for Both IRAs and Employer Plans

Total and permanent disability, with medical documentation.
Unreimbursed medical expenses exceeding 7.5% of your adjusted gross income, up to the amount of the excess.²
Substantially Equal Periodic Payments (SEPP), a schedule of annual withdrawals based on life expectancy that must continue for the longer of five years or until you reach 59½. Break the schedule and the IRS applies the 10% penalty retroactively to every prior payment, plus interest.⁵
Amounts seized by IRS levy to satisfy federal tax debt.
Terminal illness, when a physician certifies an illness expected to result in death within 84 months. Distributions on or after the certification date qualify.²
Domestic abuse by a spouse or partner. You can take up to the lesser of $10,000 (inflation-adjusted) or 50% of your balance, self-certified, and repay within three years.²
Emergency personal expenses, one distribution up to $1,000 per calendar year, self-certified, repayable within three years. You can’t take another until the previous one is repaid.⁶

IRAs Only

First-time home purchase, up to $10,000 lifetime for buying, building, or rebuilding a first home for you, your spouse, or certain family members.²
Higher education costs (tuition, fees, books, room and board) for you, your spouse, your children, or your dependents at an eligible school, with no dollar cap.²

Employer Plans Only

A Qualified Domestic Relations Order issued during divorce or legal separation, transferring assets to a former spouse, child, or dependent.⁷
Separation from service at age 55 or older (the Rule of 55).²

Hardship Withdrawals From a 401(k)

If you’re still working, your 401(k) will normally block withdrawals. A hardship withdrawal is the workaround. To qualify you must show an “immediate and heavy financial need,” and the IRS has a safe-harbor list of expenses that automatically meet that standard:

Medical care for you, your spouse, dependents, or beneficiary
Costs of purchasing your primary home (not mortgage payments)
Tuition and room and board for the next 12 months of postsecondary education
Payments needed to prevent eviction or foreclosure on your primary home
Funeral expenses for immediate family
Certain repair costs for damage to your primary home⁸

A frequent misunderstanding: qualifying for a hardship withdrawal doesn’t waive the 10% penalty. The hardship rules only decide whether your plan will release the money while you’re still employed. Whether you owe the penalty depends on whether the distribution also fits one of the exceptions above. Medical expenses over 7.5% of AGI would clear the penalty. A hardship withdrawal for funeral costs or home repairs would still get hit with it, unless you’re 59½ or older. Ordinary income tax applies to every Traditional-account hardship distribution regardless.

Borrowing Instead of Withdrawing

If your plan permits loans, a 401(k) loan avoids taxes and the penalty entirely because a loan isn’t a distribution. You can borrow the lesser of $50,000 or half your vested balance. If half your vested balance is under $10,000, some plans allow up to $10,000 anyway; the exception is optional and not every plan offers it.⁹

You generally have five years to repay, with at least quarterly payments. Loans used to buy your primary residence can run longer.¹⁰ Interest goes back into your own account. The catch: miss payments and the outstanding balance becomes a deemed distribution, taxable and possibly subject to the 10% penalty. The same trap springs if you leave the job with a loan outstanding and can’t repay. You can avoid the tax hit by rolling the unpaid balance into an IRA or another eligible plan by your tax filing deadline for that year.⁹

Moving Money Instead of Spending It: The 60-Day Rule

If you take a distribution and plan to redeposit it into another retirement account, you have 60 days from the date you receive the money. Miss the window and the full amount becomes a taxable distribution, plus the 10% penalty if you’re under 59½.¹¹

The IRS can waive the 60 days for circumstances beyond your control, but relying on that waiver is risky. The safer route is a direct rollover (trustee-to-trustee transfer): the money moves institution to institution without touching your hands, escaping both the 60-day clock and the one-rollover-per-year cap that applies to indirect IRA-to-IRA rollovers.¹¹ Ask for a direct transfer whenever it’s available.

How to Actually File the Request

Start by logging into your plan administrator’s site or calling the service line to request a distribution form. You’ll need your account number, a recent statement showing your vested balance, and a government-issued ID. The form asks you to state a reason for the distribution and to choose between direct payment to you or a rollover to another retirement account.

Withholding is automatic. Employer-plan distributions paid directly to you (not rolled over) face a mandatory 20% federal income tax withholding you can’t opt out of.¹² IRA distributions default to 10% withholding, but you can change the percentage or opt out.¹³ Withholding is just a prepayment. Your real tax bill gets settled when you file your return.

Married and taking money from certain employer plans? Your spouse may need to sign. Plans required to offer a joint-and-survivor annuity as the default (typically pension plans and money purchase plans) can’t distribute in any other form without your spouse’s notarized consent. Most 401(k) profit-sharing plans are exempt from that requirement as long as the full death benefit goes to the surviving spouse.¹⁴ If your benefit is $5,000 or less, spousal consent isn’t required no matter the plan type.

After submitting, expect a verification period of about three to five business days. Electronic transfers usually land two to three business days after approval; paper checks take a week or more. If your plan requires physical signatures or notarization, certified mail gives you delivery confirmation.

One Direction Reverses After 73

At some point the choice to withdraw becomes an obligation. Under current rules, required minimum distributions from Traditional IRAs, 401(k)s, 403(b)s, and most other tax-deferred accounts start in the calendar year you turn 73, with the starting age moving to 75 for people born in 1960 or later beginning in 2033. Roth IRAs are exempt from RMDs during the original owner’s lifetime, and designated Roth accounts inside employer plans are now also exempt while the owner is alive.¹⁵

1
Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
2
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
3
Internal Revenue Service. Roth Acct in Your Retirement Plan
4
Office of the Law Revision Counsel. 26 USC 408A – Roth IRAs
5
Internal Revenue Service. Substantially Equal Periodic Payments
6
Internal Revenue Service. Notice 2024-55 – Certain Exceptions to the 10 Percent Additional Tax Under Code Section 72(t)
7
Internal Revenue Service. Retirement Topics – QDRO – Qualified Domestic Relations Order
8
Internal Revenue Service. Retirement Topics – Hardship Distributions
9
Internal Revenue Service. Retirement Topics – Plan Loans
10
Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
11
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
12
Internal Revenue Service. 401(k) Resource Guide – Plan Participants – General Distribution Rules
13
Internal Revenue Service. Pensions and Annuity Withholding
14
Internal Revenue Service. Fixing Common Plan Mistakes – Failure to Obtain Spousal Consent
15
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs