Withdrawals from 401k Accounts: What's Considered Early or Qualified?

Withdrawals from 401k accounts are always subject to tax obligations, but they may also be subject to penalties if they are not qualified. Generally speaking, a qualified withdrawal occurs after you have reached the minimum retirement age of 59-1/2. Any time you take money out of your 401k before this date, you may face a 10-percent penalty. There are few exceptions to this rule, they include:

Qualified Rollovers

You can moved money from one retirement account to another within a narrow window of time. If the money does not hit the new account in time or if you do not move 100 percent of the money to the new account, you will owe the early withdrawal penalty.

Qualified Education Expenses

401k savings may be used to pay for secondary education for yourself or a dependent only. You do not have to replace the money when you use it for this purpose.

Qualified Housing Expenses

You may also use 401k funds to make a down payment on your first home. This money can only be used if you plan on living in the home as a primary residence.


You can take a loan from you account, but the money cannot be spent on any investment that will gain income. You must replace the loan money within a narrow window.

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