401 (k) withdrawal rules affect when account holders can take withdrawals without penalty. If you retire after age 59½, you can start taking withdrawals without paying an early withdrawal penalty. If you don’t need the money, you can let your savings sit and continue to grow tax deferred (though you won’t be able to contribute).
What is a 401(k) early withdrawal?
First, let’s recap: A 401 (k) early withdrawal is any money you take out from your retirement account before you’ve reached federal retirement age, which is currently 59 ½. You’re generally charged a 10% penalty by the Internal Revenue Service (IRS) on any withdrawals classified as early—on top of any applicable income taxes.
Can a 401(k) withdrawal affect your retirement savings?
If you haven’t reached age 59 ½, an early 401 (k) withdrawal could trigger penalties and taxes, as well as impact your retirement savings in the long term. But if you’re considering tapping into your retirement funds, here’s what you need to know. » Dive deeper: What to do when the stock market is crashing
