How much is the penalty for taking money out of a 401(k) before 59½, and what gets you out of it?

By Kaz · Published 6 October 2026 · How this site checks figures

Summary

It's 10% of the part of the withdrawal that counts as taxable income, charged on top of the ordinary income tax. Take $20,000 of pretax money out at 45 and the additional tax is $2,000. The IRS publishes a table of situations that remove it, but several apply only to a 401(k) and several only to an IRA, so rolling the money over can switch an exception on or off.

What the 10% is actually charged on

The IRS words it this way in Topic 558: "The additional tax is equal to 10% of the portion of the distribution that's includible in gross income." Two things follow from that sentence.

Money that was never deductible doesn't draw the tax. Your own Roth contributions and any after-tax contributions you made come back to you without it; only the taxable portion, usually the earnings on those dollars, can be hit.

And the 10% is separate from income tax. On a pretax withdrawal you owe both: the whole amount goes into your income for the year at your regular rate, and the 10% sits on top. It's reported on Schedule 2 of Form 1040. Form 5329 is the form for claiming an exception; Topic 558 says you can skip it when the distribution code box of your Form 1099-R shows code 1 and you simply owe the tax; the tax then goes on line 8 of Schedule 2.

A worked example

This is an illustration, not a typical case. Someone who is 45, has left the employer, and takes $20,000 out of a pretax 401(k) in 2026.

	Amount
Withdrawal	$20,000
Added to taxable income	$20,000
10% additional tax with no exception	$2,000
If $1,000 of it qualifies as an emergency personal expense distribution	10% of $19,000 = $1,900

The income tax on the $20,000 depends on the rest of that person's income, so it isn't in the table. If the money is paid out as an eligible rollover distribution, the plan also withholds 20%, which is $4,000 here. That withholding is a payment toward the year's tax bill, not the penalty itself, and the page on cashing out instead of rolling over walks through how it settles on the return.

Which exceptions belong to which account

This is the part that matters before a rollover. The IRS's table of exceptions has one column for "Qualified plans (401(k), etc.)" and one for IRAs, and the two columns don't match.

Exception (IRS wording shortened)	401(k)	IRA
Leaving the employer during or after the year you turn 55 (50 for qualified public safety employees)	Yes	No
Payments under a qualified domestic relations order	Yes	Not applicable
Health insurance premiums paid while unemployed	No	Yes
Qualified higher education expenses	No	Yes
First-time homebuyer, up to $10,000	No	Yes
Unreimbursed medical expenses above 7.5% of AGI	Yes	Yes
Birth or adoption, up to $5,000	Yes	Yes
One emergency personal expense distribution per calendar year, up to the lesser of $1,000 or your vested balance over $1,000 (after 12/31/2023)	Yes	Yes
Victim of domestic abuse, up to the lesser of $10,000 or 50% of the account (after 12/31/2023)	Yes	Yes
Federally declared disaster, up to $22,000	Yes	Yes
Total and permanent disability; death	Yes	Yes
Substantially equal periodic payments	Yes	Yes

Read across the first two rows and the next three. Rolling a 401(k) into an IRA at 56 gives up the age-55 exception for that money; the Rule of 55 page shows how the year you leave decides it. The same rollover gains the education and first-home exceptions, which a 401(k) doesn't offer.

Where two IRS pages disagree: terminal illness

The IRS exceptions table lists distributions "to a terminally ill employee, on or after the date the employee has been certified by a physician" with a yes for qualified plans and "n/a" in the IRA column. Topic 557, the IRS page for IRA withdrawals, includes the same exception for IRAs: distributions "Made to you because you are terminally ill." The exceptions table was last reviewed on 11 December 2025 and Topic 557 on 9 October 2026, and the two still disagree. Because of that conflict, this page does not treat the exception as confirmed for IRA money; a 401(k) withdrawal is covered by both.

Two cases with a different rate or no rate

A SIMPLE IRA charges more early on. The IRS says distributions "within the first 2 years of participation incur a 25% additional tax instead of 10%."

A governmental 457(b) charges nothing. Its own withdrawals before 59½ carry no 10% tax at all, and that protection doesn't follow the money into an IRA. The 403(b) and 457(b) page has the details and a dollar example.

Sources

Written by Kaz, an independent publisher.
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