# Is a 401(k) early withdrawal worth it?

Shows what a 401(k) early withdrawal before 59½ costs: the 10% additional tax, the 2026 federal income tax it adds, state tax, and what the money could have grown to.

- Page: https://www.acalculator.org/finance/401k-early-withdrawal-calculator
- JSON spec: https://www.acalculator.org/finance/401k-early-withdrawal-calculator.json
- Version: a48d80fd7739

## Default answer

Example with the default inputs (Withdrawal $20,000.00, Your age 40, Left this employer in or after the year I turned 55 No, Part covered by another exception $0.00, Other taxable income $60,000.00, Filing status Single, State income tax rate 0%, Yearly return if left invested 6%, Years until you would retire 25): Taking $20,000.00 out early at age 40 costs about $5,753.00; you keep $14,247.00.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| amount | Withdrawal | The pre-tax amount you take out of the 401(k). |
| age | Your age | Your age at the withdrawal, in years (59.5 for 59½), up to 64; from 65 use the 401(k) withdrawal tax calculator. |
| rule55 | Left this employer in or after the year I turned 55 | The rule of 55: no 10% tax on withdrawals from the plan of an employer you left in or after the year you turned 55 (50 for public safety workers). |
| exempt | Part covered by another exception | Any part of the withdrawal an exception covers: disability, medical costs over 7.5% of AGI, a birth or adoption (up to $5,000), an emergency expense (up to $1,000 a year). |
| income | Other taxable income | Your other taxable income for the year before deductions: wages, interest, other income. |
| status | Filing status | Your federal filing status. |
| state | State income tax rate | Your state income tax rate on the withdrawal (0 where there is none). Some states add their own early withdrawal tax. |
| growth | Yearly return if left invested | The yearly return the money could earn in the 401(k) if you left it there. |
| years | Years until you would retire | How many years the money could stay invested. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| net | You keep | The withdrawal minus the 10% tax, the federal income tax and the state tax on it. |
| cost | Cost of the withdrawal | The 10% additional tax plus the federal and state income tax the withdrawal adds. |
| penalty | 10% additional tax | 10% of the part not covered by an exception, before 59½. |
| federalTax | Federal income tax on it | Your federal tax with the withdrawal minus your federal tax without it. |
| stateTax | State tax | The withdrawal times the state rate. |
| costShare | Share lost | The cost as a percent of the withdrawal. |
| withheld | Withheld by the plan | A 401(k) plan withholds 20% for federal tax from a withdrawal paid to you. |
| futureValue | Left invested, it could grow to | The withdrawal grown at the yearly return for the years given, before tax. |

## Method

10% additional tax = 10% × (withdrawal − exempt part) before 59½ unless the rule of 55 applies; federal tax = 2026 tax on (other income + withdrawal) − tax on other income; state = withdrawal × rate; growth given up = withdrawal × (1 + return)^years.

## Assumptions

- Federal tax for tax year 2026 with the standard deduction and regular brackets; all other income is ordinary income, no credits.
- Under 59½ means an age below 59.5. The rule of 55 applies only to the plan of the employer you left, not to IRAs.
- Pre-tax money only. Roth contributions come out tax and penalty free; Roth earnings before 59½ are taxed and penalized.
- State tax is one flat rate; some states add their own early withdrawal tax, which is not included.
- Growth given up is before tax and fees and assumes a steady yearly return.

## Worked examples

1. amount = $20,000.00, age = 40, rule55 = no, exempt = $0.00, income = $60,000.00, status = single, state = 5%, growth = 6%, years = 25 gives penalty = $2,000.00, federalTax = $3,753.00, stateTax = $1,000.00, net = $13,247.00, futureValue = $85,837.41. Source: IRC 72(t) 10% additional tax (IRS Topic 558); 2026 single brackets (Rev. Proc. 2025-32).
2. amount = $50,000.00, age = 56, rule55 = yes, exempt = $0.00, income = $0.00, status = mfj, state = 0%, growth = 0%, years = 0 gives penalty = $0.00, federalTax = $1,783.00, net = $48,217.00, futureValue = $50,000.00. Source: IRS Topic 558 (separation from service in or after the year you reach 55).
3. amount = $10,000.00, age = 35, rule55 = no, exempt = $5,000.00, income = $30,000.00, status = hoh, state = 0%, growth = 7%, years = 0 gives penalty = $500.00, federalTax = $1,000.00, net = $8,500.00. Source: IRS Topic 558 (qualified birth or adoption distribution up to $5,000).

## FAQ

### What is the penalty for a 401(k) early withdrawal?

A withdrawal before age 59½ usually owes a 10% additional tax on top of regular income tax (IRC section 72(t), IRS Topic 558). On $20,000 that is $2,000, plus the income tax the $20,000 adds to your return.

### What is the rule of 55?

If you leave your job in or after the year you turn 55, withdrawals from that employer’s 401(k) have no 10% additional tax (age 50 for qualified public safety employees in a government plan). The rule does not cover IRAs or plans of earlier employers you left before 55.

### Which other exceptions avoid the 10% tax?

Among them: total and permanent disability, medical expenses above 7.5% of your adjusted gross income, a qualified birth or adoption distribution up to $5,000, one emergency personal expense distribution of up to $1,000 a year (from 2024), substantially equal periodic payments, and a court order in a divorce. Income tax still applies.

### Why does the plan withhold 20%?

A plan must withhold 20% for federal income tax from a distribution that could be rolled over when it pays you directly. The 20% is a prepayment; the 10% additional tax and any higher bracket are settled when you file.

### What does an early withdrawal cost in the long run?

The money stops growing tax deferred. At 6% a year, $20,000 left for 25 years grows to about $85,837 before tax. A 401(k) loan or a hardship withdrawal may cost less; check your plan’s rules.

## Sources

- Internal Revenue Service, Topic no. 558, Additional tax on early distributions from retirement plans other than IRAs (exceptions): https://www.irs.gov/taxtopics/tc558
- Internal Revenue Code section 72(t) (10% additional tax and exceptions, including 72(t)(2)(I) emergency personal expense distributions up to $1,000): https://www.law.cornell.edu/uscode/text/26/72
- Internal Revenue Service, Rev. Proc. 2025-32 (2026 tax brackets and standard deduction): https://www.irs.gov/irb/2025-45_IRB
- Internal Revenue Service, Topic no. 413, Rollovers from retirement plans (20% withholding): https://www.irs.gov/taxtopics/tc413