I am 61 years old and I don't want to withdraw money from my 401k too soon. I am wondering at what age can I take money from the 401K without being subject to penalty?



Penalties only apply to certain distributions prior to the age of 59 1/2 years. You're 61, so you no longer need to qualify your withdrawals.

Generally, distributions of elective deferrals cannot be made until one of the following occurs:

  • You die, become disabled, or otherwise have a severance from employment.
  • The plan terminates and no successor defined contribution plan is established or maintained by the employer.
  • You reach age 59½ or incur a financial hardship.

(Source: https://www.irs.gov/retirement-plans/plan-participant-employee/401k-resource-guide-plan-participants-general-distribution-rules)

Keep in mind that you will be required to withdraw money sometime in the next 10 years or so, depending on when you retire or turn 72.

  • You should also mention any additional rules if the funds are in a Roth 401(k). – mhoran_psprep May 4 at 19:45
  • I'm afraid I'm unaware of any relevant distinction between the two in this case. – chepner May 4 at 19:47
  • Some cases where distributions are 'permitted' are still subject to extra tax; see instead the section "Tax on early distributions" near the bottom of that page. – dave_thompson_085 May 5 at 8:02
  • But the OP is 61, so the issue of early distributions isn't relevant. – chepner May 6 at 18:28

The basic rule for traditional 401(k) and Traditional IRA money is that once you reach 59.5 you can take the money out of the account. The withdraws will be taxed but you will avoid any additional taxes or penalties.

The 401(k) Resource Guide - Plan Participants - General Distribution Rules describes the rules, and also gives a list of hardships to cover cases where somebody is younger than 59.5.

If you are younger than 59.5 you can pull money out of your IRA, and may be able to pull money out of your 401(k). In either case there will be an additional tax.

Tax on early distributions. If a distribution is made to you under the plan before you reach age 59½, you may have to pay a 10% additional tax on the distribution. This tax applies to the amount received that you must include in income.

Check with the specific plan rules for your company 401(k) to see if there are any limitations if you want to pull money out while you are still working.

Roth money has an additional twist. It has a 5 year rule.

Designated Roth contributions

Unlike pre-tax salary deferrals, which are not taxed when you contribute them to the plan, you have to pay taxes on your designated Roth contributions. This means your gross income for the year you make designated Roth contributions will be higher than if you had made only pre-tax salary deferrals.

However, any pre-tax salary deferrals and related earnings are taxable when you withdraw them from the plan. Roth contributions, on the other hand, are not taxed when you withdraw them from the plan. Earnings on Roth contributions are also not taxed when they are withdrawn from the plan if your withdrawal is a qualified distribution. A “qualified distribution” is a distribution that is made:

  • at least 5 years after the first contribution to your Roth account; and
  • after you’re age 59½ or on account of your being disabled, or to your beneficiary after your death.

So if the Roth portion of the 401(k) is less than 5 years old, you can't make a qualified withdraw of the Roth gains, even if you are older than 59.5.

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