How the 401(k) Early Withdrawal Penalty Works in 2026

If you take money out of your 401(k) before age 59½, the IRS typically imposes a 10% early withdrawal penalty. This is in addition to the standard federal income tax you owe on the distribution, which is treated as ordinary income.

Common Exceptions to the 10% Penalty

You might avoid the penalty (but still pay income tax) if the withdrawal is for:

• Permanent disability.
• Qualified higher education expenses.
• Birth or adoption expenses (up to $5,000).
• Hardship withdrawals for medical expenses exceeding 7.5% of AGI.