401k Age to Withdraw 2021

Learn the rules around 401k distributions

The age that one can withdraw/make distributions from a 401k without penalty is 59 ½. The age that minimum distributions are required is 72 if retiring after January 1, 2020 and 70 ½ if retiring before. Though, there are qualifications and exceptions to these dates, which will be overviewed in this article in addition to some discussion on taking distributions at 59 ½ or waiting. An outline is as follows:

401k Distributions General

401k distributions can be made:

  • Upon reaching the age of 59 ½.
  • If there is a financial hardship.
  • Upon being disabled.
  • Upon death.
  • When there is a severance from employment.
  • When the plan is terminated by the employer without a corresponding successor plan being setup.
  • Upon a qualified birth or adoption (up to $5,000).
  • For a qualified reservist distribution.

While there are a number of allowable conditions where 401k distributions can be made, many may be subject to an additional 10% tax if under the age of 59 ½. This will be discussed in more detail latter. For now, let’s go over financial hardship distributions a bit more.

Financial Hardship Distributions

A hardship can be defined as an event necessitating an immediate and heavy financial need. A distribution may be allowed for a hardship if the distribution is necessary to meet this financial need.

Some examples of eligible hardship distributions include:

  • Funeral expenses.
  • Costs around the purchase of a principal residence excluding mortgage payments.
  • Medical care expenses for the employee, spouse, or dependents.
  • Costs to prevent principal residence eviction or foreclosure.
  • Principal residence repair costs that would qualify under IRC section 165.
  • Postsecondary education expenses like tuition, books, and rent for the first 12 months of postsecondary education for the employee, spouse, children, or dependents.
  • Certain federally declared disaster expenses.

When requesting a distribution for a hardship, the plan administrator will take a look at the plan rules and all circumstances around the distribution request. Requests may be denied if the expenses could be covered via some other means such as:

  • A loan.
  • Insurnace compensation.
  • Asset liquidation.
  • Cessation of elective deferrals to the plan.

The request may also be denied if requesting a greater distribution amount than what is required.

It’s also important to point out that if taking a financial hardship distribution, then the amount will normally need to be included as income for tax purposes. It may also be subject to an additional 10% tax as well, which is discussed in the next section.

Early Distribution 10% Tax

If a distribution is made before age 59 ½, then a 10% tax in addition to standard income taxes may be levied. There are some exceptions to the 10% tax:

  • Upon a qualified birth or adoption (up to $5,000).
  • Employee has a qualifying disability.
  • Permissible withdrawal from an EACA.
  • Qualified reservist distribution.
  • IRS levy on the plan.
  • Used to reduce excess contributions.
  • Medical care up to the allowable medical expenses' deduction amount.
  • Made to an employee where there is an employment severance after the age of 55.
  • Beneficiary or employment estate payment on or after the employee’s death.
  • Series of substantially equal periodic payment.

Another exception can be with a severance of employment if handled correctly. In this scenario, assuming that you don’t or can’t stay on the pervious plan, it’s important to direct the plan administrator to rollover the funds into another eligible pre-tax retirement account, such as another 401k or IRA, in what is known as a trustee-to-trustee transfer. Going about it in this way will avoid all taxes.

On the other hand, if the funds are sent to you, then you’ll need to transfer those funds into an applicable account within 60 days yourself to avoid the 10% tax. This can get a bit complicated though so it’s best to request for the trustee-to-trustee transfer if possible.

Required Minimum Distributions

Just as there are rules around the earliest date 401k distributions can be made, there are also rules around the latest date that one can wait before taking distributions.

Minimum distributions are required upon the latter of:

  • Reaching age 72 (70 ½ if you reached 70 ½ before January 1, 2020).
  • Retirement date. There are a couple exceptions to this. First, some 401k plans may still require you to start taking distributions at a certain age independent of your retirement status. Second, if you are a 5% owner of the business sponsoring the retirement plan, then you must start taking distributions at 72 even if you have not yet retired.

Normally, the minimum distribution amount is calculated by dividing the prior December 31st balance by the life expectancy factor, which can be found here, IRS - Publication 590-B. Note that there are different life-expectancy tables and the one to use will be dependent on your individual situation.

Now, if you don’t take the required minimum distributions, then there is a significant excise tax of 50% of the amount that should have been taken but was not. If you do find yourself in this situation due to an error, then you may be able to file form 5320 to rectify the situation and avoid paying the 50% tax.

One last note here is that you can withdraw more than the required minimum distribution amount without penalty. This amount can’t be applied to the next year’s minimum distribution amount though. Also, any amount you withdraw will normally be included as part of your taxable income for the year.

Should I Withdraw at 59 ½ or Wait?

Many have this question and unfortunately the answer isn’t probably what you want to hear: it depends.

A benefit of holding off on taking distributions until later is that your money could continue to grow tax free until you do. And if your 401k funds are invested, then this could potentially be a significant amount of earnings that you might be losing out on by withdrawing earlier.

On the other hand, if you are planning on retiring within a few years of reaching 59 ½, then it may not be a good idea to have too much of your funds invested unless you have carefully planned out your retirement and are confident that you won't need to access those funds until years later. If you are not fully confident and only a small portion of the funds are invested, as is advised in this scenario, then you’re less likely to gain much by holding off on taking distributions.

Another item to consider when deciding when to take distributions is how it will affect your tax bracket for the year. Especially for those who are still working, you may want to try and hold off on taking distributions until you retire to lessen the tax burden if taking distributions will push you into a higher tax bracket.

With all that said, your decision on whether or not to take distributions at 59 ½ or wait should be made carefully and as part of your overall retirement plan. If you don’t have a retirement plan, then it may be prudent to work with a qualified financial adviser to do so.


To recap, the 401k age to withdraw without penalty and other qualifying conditions is 59 ½. The age one must withdraw is 72 (or 70 ½ if this age was reacted before January 1, 2020). And deciding whether or not to take distributions before the minimum distribution date will depend on your specific financial situation.


  1. IRS - Required Minimum Distributions
  2. IRS - Publication 560
  3. IRS - 401(k) Resource Guide - Plan Sponsors - General Distribution Rules