Can I Withdraw Money From My Retirement Account?

You can take money out of a retirement account at almost any age, but withdrawing money from a retirement account before 59½ usually triggers a 10% federal tax penalty on top of the ordinary income tax you already owe. Whether that penalty applies, how much tax you pay, and even whether the plan will release the funds depends on the account type, your age, and the reason for the withdrawal. Roth IRA owners have more room than most realize, and a long list of exceptions can wipe out the 10% penalty for people who qualify.

The 10% Penalty and the 59½ Line

The core rule: if you pull money from a qualified retirement plan or IRA before turning 59½, the IRS adds a 10% additional tax on top of the regular income tax on the distribution.¹ After 59½, the penalty is gone. You still owe income tax on Traditional account withdrawals, but the extra 10% goes away.²

There is an earlier off-ramp for people who leave a job. If you separate from your employer during or after the calendar year you turn 55, you can withdraw from that employer’s plan without the 10% penalty. This “Rule of 55” applies only to the plan tied to the job you just left. An old 401(k) with a former employer doesn’t qualify, and neither does any IRA. Public safety employees of state or local governments get the same treatment starting at age 50.²

How Traditional and Roth Withdrawals Are Taxed

Traditional 401(k) and Traditional IRA contributions went in before tax, so every dollar you withdraw counts as 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 also apply, and rates vary widely by state.

Roth accounts flip that. You already paid tax on the money going in, so qualified distributions come out tax-free, earnings included. A Roth distribution qualifies when the account has been open at least five tax years and you’ve reached 59½, or the withdrawal is due to disability or death.³ Withdraw Roth earnings before meeting both requirements and those earnings become taxable, potentially with the 10% penalty added.

Roth IRA Contributions Are Always Available

Something the standard penalty warnings don’t make obvious: your Roth IRA contributions can be withdrawn at any age, for any reason, with no tax and no penalty. The tax code’s ordering rules treat withdrawals as coming from contributions first, then converted amounts, then earnings.⁴

So a 35-year-old who put $40,000 into a Roth IRA over the years, and whose account has grown to $55,000, can pull out up to $40,000 without owing anything. Only the $15,000 in earnings faces restrictions. This ordering rule applies to Roth IRAs specifically. Designated Roth accounts inside employer plans like a Roth 401(k) don’t offer the same contribution-first treatment.

Ways to Avoid the 10% Penalty Before 59½

Federal law lists a range of situations where you can access retirement funds early and skip the 10% penalty. Some cover both IRAs and employer plans, others only one. Regular income tax still applies to Traditional distributions no matter which exception you use.

Exceptions Available for Both IRAs and Employer Plans

Total and permanent disability, with supporting medical documentation.
Unreimbursed medical expenses greater than 7.5% of your adjusted gross income (the withdrawal amount is limited to the excess).²
Substantially Equal Periodic Payments (SEPP), a schedule of annual withdrawals based on life expectancy. Payments must continue for the longer of five years or until you reach 59½; breaking the schedule causes the IRS to apply the 10% penalty retroactively to every prior distribution, plus interest.⁵
Amounts seized by the IRS to satisfy a federal tax levy.
Terminal illness certified by a physician as expected to result in death within 84 months.²
Domestic abuse by a spouse or partner, up to the lesser of $10,000 (adjusted for inflation) or 50% of the account balance. Self-certification is allowed and the amount can be repaid within three years.²
Emergency personal expenses, one distribution up to $1,000 per calendar year, self-certified, repayable within three years. A second emergency distribution is blocked during the repayment period unless the earlier one is repaid.⁶

IRA-Only Exceptions

First-time home purchase, up to a $10,000 lifetime limit, available for the account owner, spouse, or certain family members.²
Higher education costs (tuition, fees, books, room and board) for the account holder, spouse, children, or dependents at an eligible institution, with no dollar cap.²

Employer-Plan-Only Exceptions

A Qualified Domestic Relations Order (QDRO) issued in a divorce or legal separation, allowing transfer of retirement assets to a former spouse, child, or dependent without penalty.⁷
The Rule of 55 (or age 50 for qualifying public safety employees) described above.²

Hardship Withdrawals From a 401(k)

A hardship withdrawal is what lets you tap a 401(k) while still employed, when the plan would otherwise lock the funds up. You have to show an “immediate and heavy financial need.” The IRS safe harbor list covers:

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 to prevent eviction or foreclosure on your primary home
Funeral expenses for immediate family
Certain repair costs for damage to your primary home⁸

One thing people get wrong: qualifying for a hardship withdrawal does not by itself waive the 10% penalty. Hardship rules govern whether the plan will release the money while you’re working. Whether you owe the penalty depends on whether the withdrawal also fits one of the exceptions in the previous section. Medical expenses above 7.5% of AGI would avoid the penalty; funeral costs or home repairs would not, unless you’re already past 59½. Every hardship distribution from a Traditional account is taxed as ordinary income either way.

Borrowing Instead of Withdrawing

If your plan allows loans, borrowing from your 401(k) sidesteps both tax and penalty because a loan is not a distribution. You can borrow up to the lesser of $50,000 or half your vested balance. If half your balance is under $10,000, some plans let you borrow up to $10,000 anyway, but that provision is optional.⁹

Repayment is usually within five years, with at least quarterly payments. Loans for a primary residence can run longer.¹⁰ You pay interest 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 happens if you leave the job with the loan unpaid. You can avoid that outcome by rolling the outstanding amount into an IRA or another eligible plan by your tax filing deadline for that year.⁹

The 60-Day Rollover Trap

If you take a distribution and later decide to move it into another retirement account, you have 60 days from the date you received the funds to complete the deposit. Miss that window and the IRS treats the whole amount as taxable, with the 10% penalty added if you’re under 59½.¹¹

The IRS can waive the deadline for circumstances beyond your control, but that’s not something to rely on. A direct rollover (trustee-to-trustee transfer) moves the money between institutions without ever passing through your hands. It isn’t subject to the 60-day rule and doesn’t count against the one-rollover-per-year limit that applies to indirect IRA-to-IRA rollovers.¹¹ When you’re moving retirement money, ask for a direct transfer.

Filing the Request and What Gets Withheld

To start a withdrawal, log into your plan administrator’s site or call their service line and request a distribution form. You’ll need your account number, a recent statement showing your vested balance, and government-issued ID. The form asks you to state a reason for the distribution and choose between receiving the funds directly or rolling them over.

Withholding is baked in. Distributions from employer-sponsored plans like a 401(k) that go directly to you (rather than into a rollover) face a mandatory 20% federal income tax withholding, and you can’t opt out.¹² IRA distributions default to 10% withholding, but you can elect a different rate or opt out.¹³ Either way, what gets withheld is a prepayment. Your actual tax bill gets settled when you file.

Some employer plans require spousal consent for distributions in a form other than a joint-and-survivor annuity. Most 401(k) profit-sharing plans are exempt from that requirement so long as the full death benefit is payable to the surviving spouse, and consent isn’t required at all if your benefit is $5,000 or less.¹⁴

When the IRS Requires You to Withdraw

Eventually the choice isn’t yours. Under current rules, you must begin taking required minimum distributions (RMDs) in the calendar year you turn 73.¹⁵ That covers Traditional IRAs, 401(k)s, 403(b)s, and most other tax-deferred accounts. Starting in 2033, the age moves to 75 for people born in 1960 or later. Your first RMD isn’t due until April 1 of the year after you turn 73; every RMD after that is due December 31.

Miss an RMD and the excise tax is 25% of the amount you should have withdrawn. If you catch it and take the missed amount within two years, the penalty drops to 10%. Roth IRAs are the major exception: they do not require distributions during the original owner’s lifetime, which is why they carry particular weight in estate planning. Designated Roth accounts inside employer plans are now also exempt from RMDs 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