For the most part, you should avoid making early withdrawals from your 401(k) account since this can trigger being charged a penalty by the Internal Revenue Service (IRS). Withdrawing funds prior to reaching 59 ½ years of age could result in the IRS levying a 10% penalty. However, it is possible to qualify for an exemption from being charged the IRS penalty. 

Equal periodic payments 

One situation which may allow you to qualify for an exemption to the IRS penalty is if you agree to take “substantially equal periodic” payments.  The IRS has approved different methods for calculating your specific withdrawal schedule with the amount of each payment dependent on the method chosen and the owner’s life expectancy.  These payments must be made for a minimum of five years or until you reach age 59 ½, whichever comes later (unless you are disabled or die). 

Leaving your employment 

Those who are 55 years of age or older when they leave their jobs may be able to qualify for an exemption from the IRS penalty for early withdrawal from their 401(k) accounts. If you leave a job in customs border protection, federal firefighting, air traffic control or federal law enforcement, you may be able to begin taking your exemption at 50 years of age. 


In the case of a divorce court ordering, you to split your 401(k) funds with your spouse, you may be exempt from paying the IRS penalty for early withdrawal. 


If you are suffering from a disability, you may be exempt from the 10% penalty for early withdrawal from your 401(k) account. 


Another option you may have after leaving your job is to rollover your 401(k) account to another 401(k) account or an Individual Retirement Account (IRA). This may allow you to avoid having to pay the usual IRS penalty for early withdrawal. However, you will have to do this before 60 days have passed from the time you receive the check, if the check is made payable and sent to you. You should also understand that rolling over funds may result in some tax charges. 

Giving birth or adoption 

You may be able to exempt up to $5,000 for early withdrawal from your 401(k) account if you gave birth or adopted during the same year. 


Funds transferred directly from your 401(k) directly to your heirs or estate in the event of your death, may be able to avoid the IRS penalty for early withdrawal. 

Military personnel 

Military reservists may qualify for an exemption from having to pay the 10% IRS penalty for early 401(k) withdrawal if they have been called to active military duty. 

Disaster relief 

Victims of natural disasters may also be qualified to receive an exemption on penalties from the IRS for early 401(k) withdrawals. Qualifying natural disasters may include hurricanes, fires, flooding and more. 

Consult with a financial planning expert 

It may or may not be the best decision to withdraw funds early from your 401(k) account. This will be determined by your current financial situation and what goals you are trying to achieve in terms of retirement and finances. However, you may find yourself in some type of bind, such as emergency home repairs, that leave you no other choice. Speaking with a professional financial planner may be a good idea.


This may not be an exhaustive list of possible exceptions.  The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Opinions expressed in the attached article are those of the author and are not necessarily those of Raymond James.  This material is being provided for information purposes only.  Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation.  While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters.  You should discuss tax or legal matters with the appropriate professional.