IRS Rule 72t: How Can I Take Money Out of My 401k Early?

Retirement savings accounts, such as 401ks, are a great way to save for the future. But what happens if you need to access that money before retirement age? Taking money out of a 401k early can be a tricky process and should be done with caution. This article will discuss how to take money out of your 401k early and the associated risks.

Understanding the Risks of Early Withdrawal

The primary risk associated with taking money out of your 401k early is that you will incur taxes and penalties. Generally, withdrawals from a 401k before age 59 ½ are subject to an additional 10% penalty on top of regular income taxes. This penalty is designed to discourage people from accessing their retirement savings too soon. Additionally, taking money out of your 401k early reduces the amount you have saved for retirement and could lead to financial hardship down the road.

Qualifying for Early Withdrawal

Although there is an additional 10% penalty associated with taking money out of your 401k early, there are some exceptions that allow you to avoid this penalty. The most common exception is if you become disabled or suffer from a serious illness that prevents you from working. In this case, you may be able to take money out of your 401k without incurring any penalties or taxes. Additionally, if you are facing financial hardship due to job loss or other circumstances, you may be able to take a loan from your 401k without incurring any penalties or taxes (although this loan must be repaid).

Taking Money Out of Your 401K

If you decide that taking money out of your 401k is the right decision for your situation, there are several steps you must take in order to do so. First, contact your plan administrator and ask about their withdrawal policies and procedures. They will likely require documentation such as proof of disability or financial hardship in order for you to qualify for an exemption from the 10% penalty. Once all documentation has been submitted and approved by the plan administrator, they will issue a check or direct deposit payment for the amount requested (minus applicable taxes and/or penalties).


Taking money out of your 401k early should not be taken lightly as it can have long-term consequences on your retirement savings. Before making any decisions about withdrawing funds from your account, make sure that you understand all applicable laws and regulations as well as any potential risks associated with doing so. Additionally, consult with a financial advisor or tax professional who can help guide you through the process and ensure that all necessary paperwork is completed correctly in order to avoid any unnecessary penalties or taxes.

If your 401k is from a former employer, learn about IRS Rule 72t SEPP. This little know IRS approved rule allows people under age 59 ½ to unlock all or some of their pre-tax 401k money now without penalties.