What happens if I take early withdrawals from my 401(k)?

“Anytime you take early withdrawals from your 401 (k), you’ll have two primary costs — taxes and/or penalties — which will be pretty well defined based on your age and income tax rates, and the foregone investment experience you could have enjoyed if your funds remained invested in the 401 (k).

What is the 401(k) early withdrawal penalty?

1. There's no early withdrawal penalty Normally, you pay a 10% early withdrawal penalty if you withdraw funds from your 401 (k) before age 59 1/2. But the CARES Act changed the rules for this year to help people out during the pandemic.

Do you have to pay back 401(k) withdrawals?

Pros: You're not required to pay back withdrawals of the 401 (k) assets. Cons: Hardship withdrawals from 401 (k) accounts are generally taxed as ordinary income. Also, a 10% early withdrawal penalty applies on withdrawals before age 59½, unless you meet one of the IRS exceptions. Sign up for Fidelity Viewpoints weekly email for our latest insights.