How to Withdraw Money From Your 401(k) After 59½

When You're Required to Withdraw From a 401(k)

You must start required minimum distributions, or RMDs, from a traditional 401(k) at age 73. That age rises to 75 for anyone born in 1960 or later, under the SECURE 2.0 Act. If you were born between 1951 and 1959, your RMD age stays at 73. This rule applies to traditional 401(k) balances only. SECURE 2.0 removed the RMD requirement for Roth 401(k) balances starting in 2024, so that money can now stay invested for as long as you like.

Your first RMD is due by April 1 of the year after you turn the required age. Every RMD after that is due by December 31. Some plans let you delay RMDs past 73 if you keep working there, unless you own 5% or more of the company. The IRS calculates your RMD by dividing your account balance from December 31 of the prior year by a life-expectancy factor from its Uniform Lifetime Table. Use the 401(k) calculator to see how your balance and future RMDs might grow.

Missing an RMD triggers a steep tax penalty. The IRS charges a 25% excise tax on the amount you should have withdrawn. That penalty drops to 10% if you fix the shortfall within two years and file Form 5329.

Lump Sum, Periodic Withdrawals, or a Partial Rollover

A 401(k) withdrawal comes in three main forms: lump sum, periodic payments, or a partial rollover. A lump-sum withdrawal pays out your entire balance at once. The whole amount counts as taxable income that year, which can push you into a higher tax bracket. It works well for a single, large expense, but it also ends the account's tax-deferred growth.

Periodic, or systematic, withdrawals pay out a set amount on a schedule, such as monthly or quarterly. The rest of your balance stays invested and keeps growing. This method spreads your tax hit across several years, and it can double as your RMD once you reach the required age. Use the 401(k) calculator to model how long a given withdrawal rate makes your balance last.

A partial rollover moves part of your 401(k) into an IRA and leaves the rest in the plan. Moving the money directly, trustee to trustee, avoids a taxable event. Take the money yourself instead of a direct transfer, and you have 60 days to deposit it in the new account, or the IRS taxes it as a distribution. IRAs often offer more investment choices and sometimes lower fees than a former employer's plan.

How 401(k) Withdrawals Are Taxed

Traditional 401(k) withdrawals count as ordinary income in the year you take them. You pay your regular federal income tax rate, plus any state tax your state charges. Most plans automatically withhold 20% for federal taxes when you take a distribution, though the actual tax you owe at filing may be higher or lower than that.

A Roth 401(k) works differently. Qualified withdrawals come out completely tax-free, since you already paid tax on the contributions. To qualify, you need to be at least 59½ and have held the Roth account for five years. Some savers build a larger tax-free balance through a mega backdoor Roth 401(k) strategy.

A large 401(k) withdrawal can also raise your taxable income enough to push more of your Social Security benefit into taxable territory. Check that guide before you plan a big withdrawal year.

Withdrawing Before 59½: Rule of 55, Hardship Withdrawals, and 401(k) Loans

You have three main ways to access a 401(k) before age 59½. The Rule of 55 waives the 10% penalty if you leave your job at 55 or later. It only applies to the 401(k) from the employer you just left, not old accounts or IRAs. IRAs use a separate set of exceptions; run those numbers with the IRA early withdrawal calculator instead. Model the tax impact with our 401(k) early withdrawal calculator, which walks through the exact math.

A hardship withdrawal covers an immediate and heavy financial need, such as medical bills, eviction, or funeral costs. The IRS defines the qualifying reasons narrowly, and your plan must confirm you meet one. The money is taxable as ordinary income, and you may still owe the 10% penalty unless another exception applies. You can't repay a hardship withdrawal or roll it back into a retirement account.

A 401(k) loan lets you borrow from your own balance and repay it with interest to yourself. Most plans cap a loan at 50% of your vested balance, up to $50,000. You generally must repay it within five years, unless you use it to buy your main home. If you leave your job or miss payments, the unpaid balance becomes a taxable, penalized distribution.

401(k) Loan or Hardship Withdrawal: Which Costs Less?

A 401(k) loan almost always costs less than a hardship withdrawal if you expect to stay employed. A loan preserves your principal, since you pay yourself back with interest instead of losing the money to tax. A hardship withdrawal permanently removes money from the account and triggers immediate income tax, plus a possible 10% penalty.

Follow this rule of thumb. Pick a loan if your job is stable and you can repay it within five years. Pick a hardship withdrawal if you expect to change jobs soon, since leaving usually accelerates loan repayment, and a departure can turn an outstanding balance into a taxable distribution fast.

Either way, a loan still costs you the growth you miss while it's out of the market. Run both scenarios through the 401(k) early withdrawal calculator before you decide. The hardship tax hit is often larger than people expect.

When to Delay Withdrawals Past 59½

Waiting to withdraw, even after the penalty disappears at 59½, can lower your lifetime tax bill. Every dollar you withdraw while still working gets taxed at your current, often higher, marginal rate. A lower-income year works well for a bigger withdrawal, such as the gap between retiring and starting Social Security, since the same withdrawal gets taxed at a lower rate then.

Don't wait past your required RMD age, since the penalty for missing that deadline is steep. Waiting too long can backfire too, stacking withdrawals into fewer years and pushing you into a higher bracket once RMDs begin. Large RMDs can also make more of your Social Security benefit taxable.

Many retirees follow a simple spending order: taxable brokerage savings first, then tax-deferred accounts like a traditional 401(k), then Roth money last. This order lets tax-deferred and Roth balances keep growing longer. It's a starting point, not a rule, since your RMD deadline and tax bracket each year still come first. For the full comparison of fixed-dollar, total-return, and bucket withdrawal methods across ALL your accounts, not just this one, see our retirement withdrawal strategies guide.

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