You can withdraw from your 401(k) without penalty starting at age 59½. However, there are exceptions that allow penalty-free withdrawals earlier, including:
- The "rule of 55": If you leave or lose your job during or after the year you turn 55, you can withdraw penalty-free from the 401(k) associated with that job (but you must still pay income taxes on the withdrawals). This rule does not apply if you roll the money into an IRA. It applies only to the employer's 401(k) plan you left.
- Hardship withdrawals: Some 401(k) plans allow withdrawals without penalty for specific hardships, such as unreimbursed medical expenses exceeding 7.5% of your adjusted gross income, disability, or certain emergency expenses.
- Other IRS exceptions include total and permanent disability, death, and some specific cases like birth or adoption costs, disaster recovery, and terminal illness.
Withdrawing before 59½ without qualifying for one of these exceptions typically results in a 10% early withdrawal penalty plus income taxes. It's important to understand the rules of your specific plan and consider tax implications. Consulting with a financial or tax advisor is recommended before taking early withdrawals. In summary, penalty-free withdrawals normally start at age 59½ unless you meet special exceptions like the rule of 55 or qualifying hardship conditions.
