You can get money out of your retirement accounts by requesting a distribution from your plan administrator or IRA custodian, but the rules around when you can withdraw, how much you’ll owe in taxes, and whether you’ll face penalties depend on your age and the type of account. The key age thresholds are 59½ (when the 10% early withdrawal penalty disappears for most accounts) and 73 or 75 (when you’re required to start taking money out). Here’s how each path works and what it will cost you.
Withdrawals After Age 59½
Once you reach age 59½, you can take money from traditional IRAs, 401(k)s, 403(b)s, and other tax-deferred retirement accounts without paying the 10% early withdrawal penalty. You’ll still owe regular federal income tax on every dollar you withdraw, since the money went in pre-tax. Your plan or custodian will typically withhold 20% for federal taxes on a 401(k) distribution, or 10% on an IRA distribution, though your actual tax bill depends on your total income for the year.
To start a withdrawal, contact your plan administrator (for a workplace plan) or log into your account with your brokerage or custodian (for an IRA). Most providers let you request distributions online, by phone, or by submitting a paper form. Your plan may need time to calculate your benefit, value your account, and liquidate any investments before sending the money. For defined benefit plans (traditional pensions), married participants must be offered a qualified joint and survivor annuity, and your spouse may need to consent in writing if you choose a different payout option.
Required Minimum Distributions
You can’t leave money in tax-deferred accounts forever. Once you hit a certain age, the IRS requires you to take annual withdrawals called required minimum distributions (RMDs) from traditional IRAs, 401(k)s, 403(b)s, SEP IRAs, and SIMPLE IRAs. The RMD age is 73 if you were born before 1960, or 75 if you were born in 1960 or later.
Your plan administrator or IRA custodian calculates your RMD each year based on your account balance and life expectancy. If you don’t take out at least the required amount, the IRS charges a steep penalty on the shortfall. Roth IRAs are the exception: they have no RMDs during your lifetime, so you can leave that money untouched as long as you want.
Getting Money Out Before Age 59½
Withdrawing retirement money before 59½ is possible but expensive. You’ll owe regular income tax on the distribution plus a 10% additional tax penalty. On a $20,000 early withdrawal, for example, someone in the 22% tax bracket would lose roughly $6,400 between taxes and the penalty. For SIMPLE IRAs, the penalty is even steeper: 25% if you withdraw within the first two years of participating in the plan.
You’ll need to report early distributions on your Form 1040 and may also need to file Form 5329 to calculate the additional tax. There is no way around the income tax portion, but several exceptions can eliminate the 10% penalty.
Penalty-Free Exceptions
The IRS allows penalty-free early withdrawals in specific situations, though the exact list differs slightly between IRAs and employer plans. Common exceptions that waive the 10% penalty include:
- Disability: A total and permanent disability as defined by the IRS.
- Substantially equal periodic payments: A series of roughly equal annual withdrawals based on your life expectancy, taken for at least five years or until you turn 59½, whichever is longer.
- Medical expenses: Unreimbursed medical costs exceeding a percentage of your adjusted gross income.
- First-time home purchase (IRAs only): Up to $10,000 from an IRA for buying a first home.
- Health insurance premiums while unemployed (IRAs only): If you’ve received unemployment compensation for at least 12 consecutive weeks.
- Qualified birth or adoption: Up to $5,000 per parent within one year of a birth or adoption.
- Terminal illness: Distributions to individuals certified by a physician as having a terminal condition.
Hardship withdrawals from a 401(k) are a separate category. Your plan may allow you to pull money for an immediate and heavy financial need, such as medical bills, eviction prevention, or funeral costs. A hardship distribution is limited to the amount you actually need, is taxed as ordinary income, and cannot be paid back into the account. Not all plans offer hardship withdrawals, so check your plan’s summary description.
Borrowing From Your 401(k) Instead
If you need cash but want to avoid taxes and penalties entirely, a 401(k) loan may be a better option than an early withdrawal. Not every plan allows loans, but those that do follow IRS limits: you can borrow up to 50% of your vested account balance or $50,000, whichever is less. If 50% of your vested balance is under $10,000, some plans let you borrow up to $10,000.
You repay the loan to your own account with interest, typically through payroll deductions. The standard repayment window is five years, with payments due at least quarterly. If you use the loan to buy your primary residence, the plan can extend repayment beyond five years. The money you borrow isn’t taxed or penalized as long as you repay on schedule. If you leave your job before the loan is repaid, however, the outstanding balance may be treated as a distribution, triggering taxes and potentially the 10% penalty.
IRAs do not offer loans. You can use a 60-day rollover as a short-term workaround: withdraw from an IRA and redeposit the full amount within 60 days to avoid taxes and penalties. You’re limited to one such rollover per 12-month period, and missing the deadline turns it into a taxable distribution.
Roth Account Withdrawals
Roth IRAs and Roth 401(k)s follow different rules because you contributed after-tax dollars. In a Roth IRA, you can always withdraw your contributions (the money you put in) at any time, at any age, with no taxes or penalties. Earnings on those contributions are a different story: to pull them out tax-free and penalty-free, you need to be at least 59½ and the account must have been open for at least five years.
If you withdraw Roth earnings before meeting both conditions, you’ll owe income tax and potentially the 10% penalty on the earnings portion. This makes Roth IRAs a useful emergency source, since your original contributions are always accessible, while your investment gains stay protected for retirement.
How to Start the Process
The steps vary depending on the account type, but the general process is straightforward:
- Workplace plans (401(k), 403(b)): Contact your HR department or plan administrator. Many plans have online portals where you can request a distribution or loan. You’ll typically choose between a lump sum, partial withdrawal, or installment payments. If you’re still employed, most plans restrict withdrawals to loans, hardship distributions, or in-service withdrawals after a certain age.
- IRAs: Log into your brokerage account and request a distribution. You’ll choose the amount, specify tax withholding preferences, and select how to receive the funds (direct deposit, check, or wire transfer). Most IRA distributions process within a few business days.
- Pensions: Contact the pension plan administrator. You’ll typically choose between a monthly annuity payment and a lump-sum distribution. If you’re married, your spouse may need to sign a consent form if you opt for anything other than the joint and survivor annuity.
For any distribution, you’ll receive a Form 1099-R early the following year showing the amount withdrawn and any taxes withheld. You’ll use that form when filing your tax return. If you’re taking a large distribution, consider adjusting your withholding or making an estimated tax payment to avoid owing a big balance at tax time.