Table of Contents

Withdrawing from a 401(k) in retirement

Understanding 401(k) early withdrawals

Types of 401(k) hardship withdrawals

401(k) loan options

The bottom line

Learn401(k)10 Ways to Make Withdrawals From Your 401(k)

10 Ways to Make Withdrawals From Your 401(k)

Jun 21, 2022


5 min read

Facing a costly hardship may make investors feel inclined to take out money from their 401(k) before they turn 59 ½, the age the IRS begins allowing withdrawals, penalty-free.

Life is full of unexpected events—some for the better, and some for the worse. If faced with a potentially costly hardship such as foreclosure or medical bills, investors may feel pressed to make an early withdrawal from their 401(k). For those considering an early withdrawal but concerned about triggering penalties, here’s what to keep in mind.

Withdrawing from a 401(k) in retirement

Under the IRS’ 401(k) withdrawal rules, investors can begin making withdrawals after they turn 59 ½. All distributions are subject to ordinary income tax.  

As with a traditional IRA, once investors turn 72, they need to begin taking what’s known as required minimum distributions, or RMDs, from their 401(k). In 2020, president Donald J. Trump enacted the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which notably raised the age for RMDs from 70 ½ to 72.

The IRS offers a worksheet to calculate RMDs, and account holders can use an online RMD calculator to verify 401(k) withdrawal rules after 59. The IRS Uniform Lifetime Table can help individuals determine how much they need to withdraw each year.

Understanding 401(k) early withdrawals

If an account holder takes withdrawals from their 401(k) before age 59½, they may incur penalties in the form of additional taxes. The additional tax for taking an early withdrawal from a tax-advantaged retirement account is 10% on top of any applicable income taxes.

The 10% early withdrawal tax may be waived if the account owner withdraws 401(k) funds in order to pay for certain qualified expenses, however.

At Titan, we are value investors: we aim to manage our portfolios with a steady focus on fundamentals and an eye on massive long-term growth potential. Investing with Titan is easy, transparent, and effective.

Get Started

Types of 401(k) hardship withdrawals

A hardship withdrawal is defined by the IRS as a withdrawal that is “necessary to satisfy an immediate and heavy financial need.” Account holders are expected to exercise all other available options to meet their financial need before dipping into their 401(k), and after a hardship withdrawal is made, they cannot defer income into their account for 6 months.

The IRS allows hardship withdrawals for the following reasons, but plans may vary in what they permit. Some hardship withdrawals do come with income tax and the 10% penalty, some do not.

Hardship withdrawals allowed with no penalty:

  1. Coronavirus-related distributions.

    In response to economic hardships caused by the pandemic, Congress enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020. This allowed those adversely impacted by the pandemic to take up to $100,000 in early withdrawals from certain retirement plans without penalty—so long as those withdrawals were made between January 1, 2020 and December 30, 2020. Investors can repay all or part of their coronavirus-related distributions, provided they make the payment within three years of receiving the distribution.

  2. Medical expenses.

    Investors can make withdrawals to cover unreimbursed medical expenses that accounted for more than 7.5% of their adjusted gross income (AGI). These won’t incur the 10% penalty tax on the amount the investor spent beyond 7.5% of their AGI.

  3. Birth or adoption of a child.

    Under the SECURE Act, employees can withdraw up to $5,000 from a retirement plan to cover the birth or adoption of a child, penalty-free.

  4. Permanent or total disability.

    Those who become permanently and totally disabled are allowed to make hardship withdrawals, penalty-free. The distribution must be reported as income.

  5. Rule of 55.

    Individuals can withdraw funds from their current job’s 401(k) without penalty so long as they leave that job in or after the year they turn 55. Though distributions are subject to income tax, it does not matter whether the individual was laid off, fired, or quit. Employers must agree to the withdrawal, however, and may require employees to make a lump-sum withdrawal, which could translate to higher taxes.

Hardship withdrawals allowedwith taxes and penalty:

  1. Educational expenses.

    Investors may qualify for a hardship withdrawal to cover the costs of higher education (tuition, room and board, fees) for themselves, their spouse, children, or grandchildren.

  2. Purchase of principal residence.

    Investors may be eligible to withdraw up to $10,000 to help finance the purchase of their first home.

  3. Prevention of eviction or foreclosure.

    Those struggling to keep up with their mortgage or rent payments may be eligible for hardship withdrawals.

  4. Home repairs.

    Individuals repairing a home damaged by a storm, fire, or flood may qualify for hardship withdrawals.

  5. Medical insurance premiums when unemployed.

    Account holders can access 401(k) funds to pay for health insurance while they are unemployed.

401(k) loan options

Wondering how to withdraw from a 401(k) without penalty? One option investors have at their disposal is to borrow against their 401(k). Certain rules apply, and the loan must be:

  • No more than 50% of one's assets or $50,000, whichever is less
  • The loan must be repaid according to a fixed schedule
  • (Usually) the account holder must be actively employed by company sponsoring the 401(k)

Rules for taking a 401(k) loan vary from plan to plan. So investors may consider reviewing the rules, especially if they cannot (or do not intend) to pay their loan according to schedule. Keep in mind, an unpaid loan balance can have serious tax consequences, with treatment similar to a hardship withdrawal.

The bottom line

Facing a costly hardship such as foreclosure or job loss may make investors feel inclined to take out money from their 401(k) before they turn 59 ½, the age the IRS begins allowing withdrawals, penalty-free. If they decide to take an early withdrawal or even borrow against their 401(k) account, they must consider the consequences.


Certain information contained in here has been obtained from third-party sources. While taken from sources believed to be reliable, Titan has not independently verified such information and makes no representations about the accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; Titan has not reviewed such advertisements and does not endorse any advertising content contained therein.

This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any strategy managed by Titan. Any investments referred to, or described are not representative of all investments in strategies managed by Titan, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results.

Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see Titan’s Legal Page for additional important information.

Three Things, a newsletter from Titan

Stay informed on the most impactful business and financial news with analysis from our team.

You might also like

Are 401(k) Contributions Tax Deductible?

By making elective deferral contributions to a 401(k) plan, employees will reduce their current taxable income and withholding without having to take a tax deduction.

Read More

401(k) vs. IRA: Which Should You Choose?

There are some important distinctions between 401(k)s and IRAs, that investors consider to learn how each account type would impact their retirement savings strategy.

Read More

What Is a Solo 401(k)? Retirement Account For the Self-Employed

A solo 401(k), also called a self-employed 401(k) is a tax-advantaged retirement plan with high contribution limits made available for self-employed individuals.

Read More

How to Set Up a 401(k) for Small Business Owners

A 401(k) can help a small employer attract and retain workers, while potential tax credits and deductions can defray some of the costs of setting up such a plan.

Read More

Cash Management

Smart Cash

Smart Cash FAQs

Cash Options

Get Smart Cash


© Copyright 2024 Titan Global Capital Management USA LLC. All Rights Reserved.

Titan Global Capital Management USA LLC ("Titan") is an investment adviser registered with the Securities and Exchange Commission (“SEC”). By using this website, you accept and agree to Titan’s Terms of Use and Privacy Policy. Titan’s investment advisory services are available only to residents of the United States in jurisdictions where Titan is registered. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities or investment products. Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections are hypothetical in nature and may not reflect actual future performance. Account holdings and other information provided are for illustrative purposes only and are not to be considered investment recommendations. The content on this website is for informational purposes only and does not constitute a comprehensive description of Titan’s investment advisory services.

Please refer to Titan's Program Brochure for important additional information. Certain investments are not suitable for all investors. Before investing, you should consider your investment objectives and any fees charged by Titan. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested, including principal. Brokerage services are provided to Titan Clients by Titan Global Technologies LLC and Apex Clearing Corporation, both registered broker-dealers and members of FINRA/SIPC. For more information, visit our disclosures page. You may check the background of these firms by visiting FINRA's BrokerCheck.

Various Registered Investment Company products (“Third Party Funds”) offered by third party fund families and investment companies are made available on the platform. Some of these Third Party Funds are offered through Titan Global Technologies LLC. Other Third Party Funds are offered to advisory clients by Titan. Before investing in such Third Party Funds you should consult the specific supplemental information available for each product. Please refer to Titan's Program Brochure for important additional information. Certain Third Party Funds that are available on Titan’s platform are interval funds. Investments in interval funds are highly speculative and subject to a lack of liquidity that is generally available in other types of investments. Actual investment return and principal value is likely to fluctuate and may depreciate in value when redeemed. Liquidity and distributions are not guaranteed, and are subject to availability at the discretion of the Third Party Fund.

The cash sweep program is made available in coordination with Apex Clearing Corporation through Titan Global Technologies LLC. Please visit for applicable terms and conditions and important disclosures.

Cryptocurrency advisory services are provided by Titan.

Information provided by Titan Support is for informational and general educational purposes only and is not investment or financial advice.

Contact Titan at 508 LaGuardia Place NY, NY 10012.