401K Early Withdrawal Calculator & Tool

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401(k) early withdrawal calculator

If you're facing a financial emergency, changing jobs, or looking to make a major investment, cashing out your 401(k) may seem like a great idea. While this option can be a quick way to secure the funds you want, it has drawbacks. Depending on your specific situation, you could face a 10% early 401(k) withdrawal penalty, increase your tax bill, and prolong your retirement plans.

Before you request funds from your retirement plan, it's important to understand how much that decision might cost. The Empower 401(k) early withdrawal calculator estimates how much you could receive after calculating penalties and taxes. Keep reading to learn more about how this calculator works and the information it provides.

The information provided on this page is for educational purposes only and isn't intended as investment or tax advice.

Learn more: What is a 401(k)?

How the 401(k) early withdrawal calculator works

The Empower 401(k) early withdrawal calculator is easy to use and understand. You only need to enter several key factors, including:

Current and estimated retirement age
Withdrawal amount
Current 401(k) balance
Anticipated annual rate of return
Federal income tax bracket
State tax bracket
Retirement plan type (traditional or Roth)

Once you input this information, the 401(k) early withdrawal calculator automatically calculates your estimated penalties and taxes owed. It also shows the estimated net amount you can receive.

Key factors that affect your 401(k) withdrawal

Let's look at the top factors affecting your 401(k) withdrawal.

401(k) early withdrawal penalty

Unless you're aged 59½ or older at the time of your request, the IRS assesses a 10% tax penalty for early 401(k) withdrawals. There are a few exceptions to this rule, such as withdrawing funds to pay unreimbursed medical bills.

Early 401(k) withdrawal tax impact

The federal government considers funds from a 401(k) plan as ordinary income, meaning you must pay taxes on any pre-tax funds you withdraw. More importantly, adding any early withdrawal funds to your regular income could push you into a higher tax bracket, leading to a higher tax bill.

Compound growth

Another crucial factor to consider before withdrawing from your 401(k) is the impact on your retirement savings. For example, if you withdraw $20,000 early, you'll not only have $20,000 less for your retirement, but you'll also lose the power of compounding. With the potential of compounding, not only would your investments have the potential to grow, any earnings could also produce earnings.

Take the next step

Don't make any decisions about your 401(k) without knowing the facts. Try our easy-to-use Empower 401(k) early withdrawal calculator today to determine your estimated net return.

Learn more: Get personalized retirement advice today.

Additional resources

FAQs

What are the penalties for withdrawing from a 401(k) early?

If you choose to withdraw any portion of your 401(k) before you reach 59½, you'll incur a 10% early withdrawal penalty unless an exception applies.

Can I withdraw money from my 401(k) without paying taxes?

You can only withdraw money from a 401(k) without paying federal taxes if it's a qualifying Roth retirement plan you contributed to with post-tax dollars.

How to use Empower's 401(k) early withdrawal calculator?

Empower's 401(k) early withdrawal calculator is easy to use. Simply, enter the required information, including your current and anticipated retirement age, the amount you plan to withdraw, and your federal and state tax brackets. The calculator does the rest by providing the estimated net disbursement you can expect.