Can I Take Money From My 401(k) at Age 55?

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For-profit companies can elect to sponsor 401(k) plans to assist their employees with retirement savings. Typically, withdrawals cannot be taken from the plan until you reach age 59 1/2 years old. However, in certain circumstances, you may be able to tap your 401(k) plan at 55, but you may have to pay an early withdrawal penalty.

Withdrawals at Retirement

If you are at least 55 years old when you leave your job and retire, you can take qualified distributions without penalty. Leaving your job can be either voluntary, such as taking an early retirement, or involuntary, such as being fired or laid off. When you take these distributions, you have to file Form 5329 with your taxes and enter code "01" next to line 2 to show that you are taking the withdrawal because you left your job after turning 55.

Early Distributions

If you have not left your job, or if you left your job before turning 55 years old, you may be able to take an early distribution from your 401(k) plan but you will have to pay a tax penalty. If you left your job, you can take money out for any reason. If you are still working, you will only be able to take a hardship withdrawal. Hardship withdrawals can be taken when you have an immediate and heavy financial need and you have no other resources to satisfy the financial need.

Avoiding the Penalty

If you take an early distribution, you might be able to avoid the 10 percent tax penalty, but not the income taxes. Exceptions include using money from your medical expenses that exceed 7.5 percent of your adjusted gross income, or if you suffer a permanent disability. You must note this exemption on Form 5329 to avoid the 10 percent early withdrawal penalty.


Most 401(k) plans permit their account holders to take loans from their accounts at any time. These loans can be up to $50,000 or 50 percent of your account balance, whichever is smaller. However, this amount must be repaid over five years with interest. If you do not repay the 401(k) loan, the IRS will count the money left to be repaid as an early distribution, subject to taxes and early withdrawal penalties.