Before you cash out
401(k) Early Withdrawal Penalty Calculator
Taking money out of a 401(k) or IRA before age 59½ usually triggers a 10% penalty plus ordinary income tax. See how little you'd actually keep - and whether an exception (like the Rule of 55) lets you skip the penalty.
What you'd keep
You actually keep
$13,600
That's only 0%
- Gross withdrawal$20,000
- 10% early-withdrawal penalty$2,000
- Federal income tax$4,400
- Effective cost32.0%
Cashing out early also costs you decades of tax-deferred growth - often the biggest loss of all. A rollover usually beats a withdrawal.
Exceptions to the 10% penalty
You may avoid the penalty (but usually still owe income tax) if one of these applies. 401 = applies to workplace plans, IRA = applies to IRAs.
| Exception | 401(k) | IRA | Details |
|---|---|---|---|
| Age 59 1/2 or older | Yes | Yes | No 10% penalty on distributions taken on or after age 59 1/2. |
| Rule of 55 (separation from service) | Yes | - | 401(k)/403(b) distributions are penalty-free if you leave that employer in or after the year you turn 55 (50 for qualifying public-safety workers). |
| Substantially equal periodic payments - 72(t) / SEPP | Yes | Yes | Penalty-free if taken as a series of substantially equal periodic payments over your life expectancy (must continue 5 years or to age 59 1/2, whichever is longer). |
| Total and permanent disability | Yes | Yes | No penalty if you are totally and permanently disabled. |
| Death of the account owner | Yes | Yes | Distributions to a beneficiary or estate after the owner's death are penalty-free. |
| Unreimbursed medical expenses | Yes | Yes | Penalty-free to the extent expenses exceed 7.5% of adjusted gross income. |
| IRS levy on the plan | Yes | Yes | No penalty if the distribution is due to an IRS levy on the account. |
| Qualified Domestic Relations Order (QDRO) | Yes | - | 401(k) payouts to an alternate payee under a QDRO are penalty-free. |
| First-time home purchase (IRA) | - | Yes | Up to $10,000 lifetime from an IRA for a first home is penalty-free. |
| Qualified higher-education expenses (IRA) | - | Yes | IRA distributions for qualified higher-education costs are penalty-free. |
| Health insurance while unemployed (IRA) | - | Yes | IRA distributions to pay health insurance after 12+ weeks of unemployment are penalty-free. |
| Birth or adoption | Yes | Yes | Up to $5,000 per child within one year of a birth or adoption is penalty-free. |
| Emergency personal expense (SECURE 2.0) | Yes | Yes | One penalty-free emergency distribution of up to $1,000 per year is allowed. |
| Federally declared disaster | Yes | Yes | Up to $22,000 for a qualified federally declared disaster is penalty-free. |
| Qualified reservist distribution | Yes | Yes | Called to active duty for 180+ days: penalty-free. |
| Domestic abuse victim (SECURE 2.0) | Yes | Yes | The lesser of $10,000 or 50% of the account is penalty-free for eligible victims. |
| Terminal illness | Yes | Yes | Distributions to a terminally ill individual are penalty-free. |
Source: IRC §72(t) and IRS Topic No. 558. Rules can change - verify before relying on an exception.
Figures current for 2026 · last reviewed June 2026 · sourced from the IRS (IRS Notice 2025-67). How we calculate & cite our data. Educational only — not financial advice.
Assumptions & notes
How is the penalty calculated?
Non-qualified early distributions face a flat 10% additional tax on top of regular income tax. We add 10% (unless you flag an exception) plus your marginal federal rate, and - if you pick a state - the state's marginal income-tax rate on the withdrawal. State retirement-income exclusions and local taxes aren't modeled; see our methodology.
What is the Rule of 55?
If you leave your job in or after the year you turn 55, you can take penalty-free distributions from that employer's 401(k) (50 for certain public-safety workers). It doesn't apply to IRAs.
What is 72(t) / SEPP?
Substantially Equal Periodic Payments let you take penalty-free withdrawals before 59½ as a fixed series based on life expectancy. They must continue for 5 years or until 59½, whichever is longer - breaking them retroactively triggers penalties.
These are assumptions, not guarantees. Investment returns and inflation are estimates you control - markets vary and past performance does not predict future results. Tax figures use current-year IRS numbers; your situation may differ. This tool is educational and not financial advice.