Why Can’t I Withdraw My 401k

Withdrawals from a 401(k) account are generally limited to certain circumstances, such as retirement, disability, or a financial hardship. The funds in a 401(k) are meant for long-term retirement savings, and early withdrawals may be subject to taxes and penalties. If you need to access funds from your 401(k) before retirement, you should explore other options, such as a loan from the plan or a hardship withdrawal.

Premature Withdrawal Penalties

Withdrawing money from your 401(k) before you reach age 59½ can result in significant penalties. These penalties are designed to encourage you to keep your money invested in your retirement account so that it can grow over time.

Penalties for Premature Withdrawal

  • 10% early withdrawal penalty: This penalty is applied to the amount of money you withdraw before you reach age 59½.
  • Income tax on withdrawal: In addition to the 10% early withdrawal penalty, you will also have to pay income tax on the amount of money you withdraw. This is because 401(k) contributions are made pre-tax.

Exceptions to the Premature Withdrawal Penalty

There are a few exceptions to the premature withdrawal penalty. These exceptions include:

  • Disability: You can withdraw money from your 401(k) penalty-free if you become disabled.
  • Death: If you die, your beneficiaries can withdraw money from your 401(k) penalty-free.
  • Medical expenses: You can withdraw money from your 401(k) penalty-free to pay for unreimbursed medical expenses that exceed 7.5% of your adjusted gross income.
  • First-time home purchase: You can withdraw up to $10,000 from your 401(k) penalty-free to buy your first home.
  • Higher education expenses: You can withdraw money from your 401(k) penalty-free to pay for qualified higher education expenses for yourself, your spouse, or your children.

Table of Premature Withdrawal Penalties

Withdrawal AgePenalty
Under 59½10% early withdrawal penalty plus income tax
59½ or olderNo penalty or income tax

Rollover Limitations

Under certain circumstances, you may be able to withdraw money from your 401(k) without incurring a 10% penalty. One option is to roll over your 401(k) into another retirement account, such as an IRA. However, there are some limitations on how often you can roll over your 401(k) funds.

  • You can only roll over your 401(k) funds once every 12 months.
  • You cannot roll over more than $100,000 in a 12-month period.

If you exceed either of these limits, you will incur a 10% penalty on the amount of the excess rollover.

Type of RolloverFrequencyLimit
Direct RolloverOnce every 12 months$100,000
Indirect RolloverOnce every 12 months$100,000

Tax Implications of Early 401(k) Withdrawals

When withdrawing funds from a 401(k) account before age 59½, you’ll likely face tax penalties.

Taxable Income

* The withdrawn amount is included in your taxable income for the year.

10% Early Withdrawal Penalty

* A 10% penalty is imposed on the taxable amount, regardless of your reason for withdrawal.

Exceptions to the Early Withdrawal Penalty

Under specific circumstances, you may avoid the 10% penalty:


  • Substantially equal periodic payments
  • *

  • Medical expenses exceeding 7.5% of your adjusted gross income
  • *

  • Higher education expenses for yourself, your spouse, or children
  • Withholding

    * Federal income tax of 20% is automatically withheld from early withdrawals.
    * You can request a different withholding rate by completing Form W-4P.

    Table of Taxable Income and Penalty

    Withdrawn AmountTaxable IncomeEarly Withdrawal Penalty

    Thanks for sticking with me through this 401(k) withdrawal maze. I know it can be a bit of a headache, but hopefully this article has shed some light on the situation. If you still have questions, be sure to check out the resources I’ve linked throughout the article. And don’t forget to come back later for more finance-related wisdom!