Limited Early Withdrawal Options
If you really, really need to take money out of your 401(k) account, you have limited options. With few exceptions, IRS rules forbid 401(k) distributions unless you reach age 59 1/2, your plan is terminated or you become disabled. You might also be eligible if you are fired from or otherwise leave your job, or if you have a financial hardship.
From the perspective of the IRS, financial hardships that are voluntarily incurred or reasonably foreseeable do not qualify. In most cases, even if you can access your money early, you’ll owe not just ordinary income tax on the entire amount but also a 10% early withdrawal penalty. For some participants, this could amount to nearly half their entire distribution.
