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Ask the Experts

Can I Tap My 401(k) Early With No Penalty?

Yes, if you retire at 55, but check the rules

En español | Q. After 30 years on the job, I plan to retire next year when I turn 58. Will I be able to withdraw money from my 401(k) without having to pay a penalty, or should I roll it into an IRA?

A. If you leave your job or get laid off in the year you turn 55 (50 if you're a public safety worker), you can begin taking money from your 401(k) without getting hit with the usual 10 percent penalty for early withdrawals. This assumes you retire and don't begin another job.

See also: What should I do with my 401(k)?

Withdrawing from 401K over age 55-African American man

Retire at 55 and you can begin taking money from your 401(k) without penalty. — Photo by Sean Justice/age fotostock

If you decide to roll your 401(k) money into an IRA, however, you'd generally have to wait until 59 1/2 to get at the money penalty-free.

However, there are several exceptions that allow early IRA withdrawals without penalty. Among them are:

  • First-time home purchase,
  • Education expenses for you and your immediate family,
  • Unreimbursed medical expenses that exceed 7.5 percent of your adjusted gross income, and
  • Extended unemployment — if you're out of work for at least 12 weeks, you may withdraw funds to pay health insurance premiums for yourself, your spouse, or your dependents.

There are also special exceptions for early 401(k) withdrawals. It's a complex set of rules — you'd do well to consult a financial professional.

You may also like: Is your retirement on track? >>

Carole Fleck is a senior editor at the AARP Bulletin.

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