How to Withdraw From Your 401k After Age 60: Taxes and Rollovers

Once you turn 60, you can withdraw from your 401k without the 10% early-withdrawal penalty that hits younger account holders. That is the good news. The rest of the picture is about taxes: every dollar you pull from a traditional 401k counts as ordinary income for the year, your plan administrator will withhold 20% up front, and a large one-time distribution can push part of your income into a higher bracket. Knowing how to withdraw from your 401k after age 60 is really about deciding how much to take, how to receive it, and whether to roll it somewhere else instead.

The 10% Penalty No Longer Applies

The IRS imposes a 10% additional tax on 401k distributions taken before age 59½.¹ At 60 you are past that line, so the surcharge is gone. Regular federal income tax still applies to traditional 401k withdrawals, and state income tax may apply as well.

Federal rules let 401k plans distribute funds once you reach 59½, separate from your employer, become disabled, or hit certain other qualifying events. Your specific plan document controls which of those options are actually on the table for you.²

How Traditional 401k Withdrawals Are Taxed

Traditional 401k contributions went in pre-tax, so the full amount of any withdrawal is taxable as ordinary income in the year you receive it.³ The distribution stacks on top of any wages, Social Security, pension, or investment income you already have that year, so even a moderate withdrawal can land part of your income in a higher bracket than you expect.

For 2026, the federal income tax brackets for single filers are:⁴

10% on income up to $12,400
12% from $12,401 to $50,400
22% from $50,401 to $105,700
24% from $105,701 to $201,775
32% from $201,776 to $256,225
35% from $256,226 to $640,600
37% over $640,600

Married couples filing jointly get wider brackets. The 22% bracket, for instance, covers joint income between $100,801 and $211,400.⁴

The Automatic 20% Withholding

When your plan administrator sends distribution money directly to you, federal law requires them to withhold 20% of the taxable amount for federal income tax, regardless of what your actual rate will be for the year.⁵ That 20% is a prepayment toward your tax bill, not your final liability. When you file, you may owe more or get a refund depending on your total income.

State withholding may also come off the top, depending on where you live. The distribution form usually includes a section for state elections and for adding voluntary federal withholding above the 20% floor.

Roth 401k Withdrawals

Roth 401k contributions were made with after-tax money, so the contribution portion of any withdrawal comes out tax-free. Earnings are tax-free only if you are at least 59½ and the Roth 401k has been open for at least five tax years. The five-year clock starts on January 1 of the first year you made a Roth contribution to that plan.

If you first funded the Roth 401k in 2023, the five-year period runs through December 31, 2027. Take earnings out before 2028 and the earnings portion is taxable, even at 60. Your original contributions remain tax-free either way.

Withdrawing While Still Working

Federal rules permit 401k plans to allow in-service withdrawals once you reach 59½, but your employer’s plan does not have to offer them.² If your plan document does not permit them, you may have to wait until you separate from service, even though you are past the age threshold.

Check your summary plan description or ask the plan administrator whether in-service distributions are allowed. If they are, the process runs the same as a post-separation withdrawal: distribution request, payout method, tax withholding elections.

Rolling Over Instead of Cashing Out

A direct payout is not the only option. You can move 401k funds into an IRA or a new employer’s plan without triggering immediate tax. The mechanics matter.

Direct Rollover

In a direct rollover, the plan administrator sends the funds straight to the receiving IRA or plan. The money never passes through your hands, and the 20% mandatory withholding does not apply.⁵ The full balance transfers intact, and no tax is due until you eventually withdraw from the new account. This is the simplest way to move retirement money.

Indirect (60-Day) Rollover

With an indirect rollover the plan sends a check to you, and you have 60 days to deposit the funds into another eligible retirement account.⁶ Miss the window and the whole distribution becomes taxable income for the year.

Here is the catch: the administrator still withholds 20% before sending the check.⁵ To roll over the full original amount, you have to replace that 20% out of pocket within the 60 days. On a $100,000 withdrawal, you receive $80,000. To complete a full rollover, you deposit $100,000 in the new account, using the $80,000 you got plus $20,000 from other savings. You recover the withheld $20,000 as a credit when you file.

Roth Conversion

You can also roll traditional 401k money directly into a Roth IRA. The converted amount is taxed as ordinary income for the year of the conversion, and all future growth and qualified withdrawals from the Roth IRA are tax-free. The one-rollover-per-year limitation that applies to IRA-to-IRA transfers does not apply to rollovers from a 401k, including Roth conversions.⁵

Converting smaller amounts across several years lets you keep each year’s total income within a lower bracket. This works especially well in low-income years, such as after you retire but before Social Security or pension payments start.

Requesting the Withdrawal

The steps vary by administrator, but most plans follow the same pattern. Gather your information first.

What You Will Need

The plan administrator’s name (Fidelity, Vanguard, Schwab, or another custodian) and its distribution request form, usually available in the online portal or by phone
Your Social Security number and the plan ID tied to your employer’s program
Your current employment status with the sponsoring employer, since plan restrictions may differ if you are still working there
Your tax withholding election; the federal default on a direct-to-you distribution is 20%, and you can request more if you expect to owe it
Routing and account numbers for the bank account where you want the funds deposited

Submitting the Request

Most administrators offer an online portal for distribution requests. Look for a section labeled Withdrawals, Distributions, or Transfers after logging in. Enter the amount, pick the payment method, and set your withholding.

Some plans require spousal consent if you are married. Federal law mandates it for plans subject to joint and survivor annuity rules, and the spouse’s written agreement may need a notary or plan representative as witness.⁷ Many defined contribution plans are structured to avoid the requirement. If yours has it, the administrator will tell you, and this is usually the step that cannot be done fully online — the signed form typically has to be uploaded or faxed.

You should receive a confirmation number or email once everything is submitted. Keep it in case you need to follow up.

When the Money Arrives

After approval, most administrators process the distribution within 3 to 10 business days. An ACH deposit usually hits your bank within 2 to 3 business days after processing. A mailed check can take up to two weeks.

Effect on Social Security Taxation

If you are already collecting Social Security at 60 (rare, but possible for survivor or disability benefits), or if you start benefits later while still taking 401k withdrawals, the extra income can make a larger share of your Social Security taxable. The IRS uses “combined income” — your adjusted gross income, plus any nontaxable interest, plus half of your Social Security benefits — to decide how much of the benefits are taxed.

Single filers: combined income between $25,000 and $34,000 means up to 50% of benefits may be taxable; above $34,000, up to 85% may be taxable.
Married filing jointly: combined income between $32,000 and $44,000 means up to 50% may be taxable; above $44,000, up to 85% may be taxable.

A 401k distribution adds directly to adjusted gross income, so a large withdrawal can push you across a threshold. Spreading withdrawals over multiple years, or drawing partly from Roth accounts (which do not count toward combined income), can hold that share down.

Tax Reporting for the Year

By January 31 of the year after your distribution, the plan administrator must furnish Form 1099-R, showing the gross distribution and the amount withheld for taxes.⁸ You use that form to report the distribution and claim credit for the withholding when you file your federal return.

1
Internal Revenue Service. Substantially Equal Periodic Payments
2
Internal Revenue Service. 401(k) Resource Guide – Plan Participants – General Distribution Rules
3
Office of the Law Revision Counsel. 26 USC 402 – Taxability of Beneficiary of Employees Trust
4
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
5
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
6
Internal Revenue Service. Retirement Plans FAQs Relating to Waivers of the 60-Day Rollover Requirement
7
Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans
8
Internal Revenue Service. General Instructions for Certain Information Returns