If you are under the age of 59 ½ and want to take out money from your 401k then you are going to get hit with something called an early 401k withdrawal penalty. This is a 10% penalty on any money you take out, so if you take out $10,000 you must pay $1,000 in fees. And because this money is considered an income you would also have to pay taxes.
So how can you get around this penalty? There are a couple of things you could do to get around it.
If you do qualify for one of the hardship requirements then you may be allowed to take money out without having to pay the penalty on it. So, what type of things qualify? Well there is a list of things that is acceptable and normally you have to be in some sort of hardship.
An example of something that could be classified as a hardship would be if you where not able to work because of some disability, in that case you might be able to use your 401k to help you. There are also a few rules that allow you to take money out in order to help you grow.
For example, say you want to go back to school and need help paying down your collage loans. Going to collage is a fantastic growing opportunity that can be a big aid into your future.
If you do not qualify, but still want to take money out you may be able to take out a 401k loan. You would not be forced to pay taxes or the penalty on it because after all, a loan is not income. But it is still a loan, that means if you take it out it has to be paid back and with interest.
One bigger problem is that many plans will limit the amount you can invest into your plan while you have loan out. This can be the most devastating thing you can do to your retirement saving if you are going to have the loan out for a while.
So, while there are a couple ways to take money out a 401k withdraw early, it should still be used only for emergencies. After all 401ks are suppose to be for the future.