Avoiding the 10% Penalty on Early 401(k) Withdrawals

Withdrawing from your 401(k) before age 59½ typically comes with a 10% early withdrawal penalty, in addition to regular income tax. But did you know there are several exceptions that could save you thousands of dollars? In this article, we explore the rules around early withdrawals and when you may qualify for a penalty-free distribution—such as in cases of disability, substantial medical expenses, or separation from service. We’ll also explain how to document your exception and report it properly using IRS Form 5329. Whether you’re facing financial hardship or considering tapping into your retirement savings early, understanding these rules is critical. We make it easy to know when penalties apply and how to avoid them legally. Don’t pay more tax than you need to—learn your rights, your options, and how to make smart choices about your 401(k) withdrawals.