401(k) Early Withdrawal Calculator (Tax and Penalty)

What happens when you withdraw from a 401(k) early

If you take money out of a 401(k), 403(b) or traditional IRA before age 59½, you usually owe two things: income tax on the amount, because it is added to your taxable income, and a 10% additional tax (the early withdrawal penalty). Your plan must also withhold 20% for federal tax on most payments made directly to you, which may be more or less than you owe.

Worked example

At age 45, you withdraw $20,000 from a 401(k) while in the 22% federal bracket, with a 5% state tax. The penalty is $2,000, the federal tax is $4,400 and the state tax is $1,000, so you keep about $12,600. You lose 37% of the withdrawal, and the money also stops growing in the account for retirement. To receive $10,000 after the same tax and penalty (a combined 37%), you would need to withdraw about $15,873.

Exceptions to the 10% penalty

Some withdrawals avoid the 10% penalty, though they are still taxed. The main exceptions include:

• Leaving your employer in or after the year you turn 55 (the “rule of 55”), for that employer’s plan only.
• Permanent disability, or death (for your beneficiaries).
• Unreimbursed medical expenses above 7.5% of your adjusted gross income.
• A series of substantially equal periodic payments.
• Up to $5,000 for the birth or adoption of a child, and a limited emergency expense withdrawal of up to $1,000 a year.
• Certain disaster, domestic abuse and terminal illness distributions.

Rules and amounts change, so check IRS guidance or ask a tax adviser before you withdraw.

Things to consider first

• A 401(k) loan, if your plan allows it, avoids the tax and penalty if you repay it on time.
• Roth contributions (not the earnings) can generally be withdrawn without tax or penalty, which is different from a traditional 401(k).
• Your bracket depends on all your income that year, so a large withdrawal can push you into a higher bracket than this estimate uses.

This is an estimate for general information, not tax advice. To see your full tax picture, use the US federal income tax calculator.