401k Withdrawal Calculator

Your age at withdrawal determines penalties and options available.

Before Age 55 (Standard Early Withdrawal)

Example: $50,000 withdrawal, 24% federal bracket, 5% state:

• Federal tax: $12,000
• State tax: $2,500
• Penalty: $5,000
• Net received: $30,500

Age 55-59½ (Rule of 55)

If you leave your job at age 55 or later:

• No 10% penalty on withdrawals from THAT employer`s 401(k)
• Must be separated from service
• Does NOT apply to IRAs
• Does NOT apply to old 401(k)s from previous employers

Age 59½ and Older

• No early withdrawal penalty
• Income tax still applies
• Can withdraw any amount
• Can still leave money to grow

Age 73 and Older (RMDs)

• Must take Required Minimum Distributions
• Failure to withdraw: 25% penalty on shortfall
• RMD amount based on account balance and life expectancy
• Can always withdraw more than RMD

Several exceptions allow penalty-free withdrawals before 59½. You still owe income tax.

Penalty Exceptions for 401(k)s

72(t) Substantially Equal Periodic Payments (SEPP)

Take penalty-free withdrawals at any age if you:

• Calculate payment using IRS-approved method
• Take payments for 5 years OR until 59½ (whichever is longer)
• Cannot modify payments once started

Methods for calculating 72(t):

1. Required Minimum Distribution method
2. Fixed Amortization method
3. Fixed Annuitization method

Caution: Breaking the schedule triggers penalties on ALL prior withdrawals.

NOT Penalty Exceptions for 401(k)

These work for IRAs but NOT 401(k)s:

• First-time home purchase ($10,000)
• Higher education expenses

Strategy: Roll 401(k) to IRA if you need these exceptions.

When you withdraw from a 401(k), mandatory withholding applies.

Mandatory Withholding Rates

The 20% Withholding Problem

When you take a cash distribution:

• 20% is automatically withheld for federal taxes
• You receive only 80%
• You may owe MORE at tax time
• Or you may get a refund if you overpaid

Example:

• $100,000 withdrawal
• $20,000 withheld (20%)
• You receive: $80,000
• Actual tax at 24%: $24,000
• You owe additional: $4,000 at tax time

Avoiding Withholding with Rollover

Direct rollover to another qualified plan or IRA:

• No withholding
• No taxes triggered
• Full amount transfers
• Must go directly to new custodian

State Withholding

State withholding varies:

• Some states have mandatory withholding
• Others follow federal election
• Some allow opting out
• Check your specific state rules

Before withdrawing, consider these potentially better options.

401(k) Loans

Borrow from your own account:

• Up to $50,000 or 50% of balance (whichever is less)
• No credit check
• Pay yourself back with interest
• Not a taxable event

Risks:

• If you leave job, usually due in 60 days
• Failure to repay = taxable distribution + penalty
• Lose out on market growth

Hardship Withdrawals

Some plans allow hardship withdrawals for:

• Medical expenses
• Home purchase (primary residence)
• Tuition and education
• Preventing eviction
• Funeral expenses
• Home repair from disaster

Rules:

• Must have no other resources
• May need to exhaust loans first
• Still subject to taxes and penalties
• Cannot contribute to 401(k) for 6 months after

Other Borrowing Options

Emergency Fund First

If you do not have an emergency fund:

• Build one before investing heavily
• 3-6 months expenses in savings
• Prevents retirement raiding

Once you reach retirement, strategy matters for minimizing lifetime taxes.

The Withdrawal Order

Traditional wisdom suggests:

1. Taxable accounts first
2. Tax-deferred (401k/Traditional IRA) second
3. Tax-free (Roth) last

Why: Let tax-advantaged accounts grow longer.

But consider: Strategic Roth conversions and tax bracket management.

Tax Bracket Management

Stay within lower brackets by:

• Taking 401(k) distributions to "fill" a bracket
• Converting excess to Roth in low-income years
• Timing Social Security to coordinate with withdrawals

Example (Married Filing Jointly 2026):

• 12% bracket ends at: $96,950
• 22% bracket ends at: $206,700
• Withdraw/convert up to bracket limit each year

RMD Coordination

At 73, RMDs begin and may:

• Push you into higher brackets
• Increase Medicare premiums (IRMAA)
• Make Social Security taxable

Strategy: Take voluntary distributions before 73 to:

• Reduce RMDs later
• Convert to Roth before RMDs required
• Smooth out lifetime tax burden

Social Security Timing

Coordinate 401(k) withdrawals with Social Security:

• Delay Social Security? Take more from 401(k) in bridge years
• Take Social Security early? May need less 401(k)
• Consider tax impact of combined income

Use our Retirement Calculator for comprehensive planning.

State taxes on 401(k) withdrawals vary significantly.

States With No Income Tax

*These states tax interest/dividends but not 401(k) distributions.

States That Exempt Retirement Income

Some states partially or fully exempt retirement income:

• Illinois: Full exemption
• Mississippi: Full exemption
• Pennsylvania: Full exemption
• Alabama: Pension exempt, IRA/401k taxable

High-Tax States

States with highest income tax rates:

• California: Up to 13.3%
• Hawaii: Up to 11%
• New Jersey: Up to 10.75%
• Oregon: Up to 9.9%
• Minnesota: Up to 9.85%

Changing Residency

Moving to a no-tax state before retirement:

• Can save significant state taxes
• Must establish genuine domicile
• State may challenge if ties remain
• Consider total cost of living, not just taxes

State Tax Withholding

Some states require withholding:

• California: Mandatory 10% (unless exempt)
• Others: Optional or follow federal
• Can usually change withholding amount