You saved money in your 401(k) and you want to use it. Your age, employment status and your plan's rules determine how you can take money out of your 401(k) account. Know the rules so you can avoid taxes and expensive penalties when accessing the funds you have saved.
When You Are Still Employed by the Sponsoring Company
As long as you're still employed by the company that sponsors your 401(k), you typically have three ways to access funds. Remember that loans must be repaid with interest and withdrawals may have tax consequences depending on the type.
- 401(k) loans allow you to borrow from your account balance to pay many types of expenses. Usually, there's a limit of $50,000 or half of your vested 401(k) balance.
- 401(k) hardship withdrawals let you use money in your account for specific immediate needs, such as buying a home, preventing eviction, paying qualifying medical or education expenses, or easing severe financial pressure.
- In-service distributions let you take a portion of your vested balance while still employed. These are often limited to participants over age 50½ and may require you to move the money into a qualified retirement account to avoid taxes.
If you are concerned about lender or loan-related protections, review options such as Loan Brokers Insurance and Loan Institution VSI (Vendor's Single Interest) for related coverage considerations.
When You're No Longer Employed at the Sponsoring Company
After you leave the company that sponsored your 401(k), contact the plan administrator to access your funds. You can no longer borrow from the account, but you can withdraw, roll over, or otherwise move the money.
- Regular withdrawals apply if you are over age 59½. You will pay income tax on the money you withdraw, but there is no early-withdrawal penalty.
- Early distributions apply when you withdraw funds before age 59½; these are generally subject to income tax and a 10 percent penalty unless an exception applies.
- You can roll your 401(k) into an IRA to avoid immediate taxes and keep your retirement savings invested.
For information about plan options and related insurance topics, see 401(k) and 403(b) Retirement Plans and Related Insurance.
When You Are the Beneficiary of a 401(k) Plan
As a beneficiary, your access to a 401(k) depends on the deceased participant's plan rules and your relationship to them. Distributions vary based on whether the participant had reached retirement age and whether you are the spouse.
If the plan is associated with public employment, additional considerations may apply; see Governmental Accounts Insurance for related information that may be helpful in those cases.
Your 401(k) is a tool to save for retirement. Before taking money out, understand the tax consequences and any penalties, and consult the plan administrator or a financial advisor; you can also talk to an agent for personalized guidance.
Frequently Asked Questions
Can I borrow from my 401(k) while I'm still employed?
Many plans allow 401(k) loans up to $50,000 or half your vested balance; loans must be repaid with interest according to the plan's schedule.
What qualifies for a hardship withdrawal?
Hardship withdrawals are limited to immediate and heavy financial needs, such as preventing eviction, paying certain medical or education expenses, or buying a primary residence as defined by your plan.
What happens if I withdraw before age 59½?
Early withdrawals are generally subject to income tax and a 10 percent penalty unless you meet an IRS exception or the plan allows penalty-free withdrawals under specific circumstances.
How do beneficiaries typically receive 401(k) funds?
Options vary by plan and relationship to the participant; beneficiaries may be able to take a lump-sum, receive distributions over time, or roll funds into an inherited IRA.