401K Early Withdrawal Calculator & Tool

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What does the 401(k) early withdrawal calculator estimate?

Empower’s 401(k) early withdrawal calculator estimates your net withdrawal amount after federal income taxes, state taxes, and any applicable 10% early withdrawal penalty. It also shows how cashing out your traditional or Roth 401(k) early may impact the potential growth of your retirement savings.

If you're leaving a job, facing a financial emergency, or looking to make a major investment, then you may be considering cashing out some or all of your 401(k). While this option can be a quick way to secure the funds you want, it has drawbacks that may affect your retirement plan. Understanding these drawbacks can help you decide whether making an early withdrawal from your 401(k) is the best choice for your situation

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

Read more: Retirement plan withdrawals

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:

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 shows the estimated net amount you can receive from cashing out your 401(k) and the projected value your account had the potential to reach if the money had remained invested until your target retirement age.

Key factors that affect your 401(k) withdrawal

Your 401(k) withdrawals may be affected by the 10% early withdrawal tax penalty imposed by the IRS, as well as federal and state income taxes.

401(k) withdrawal penalty and exceptions

If you’re younger than 59½ years old at the time of your request, then the IRS imposes a 10% early withdrawal penalty.

The IRS allows certain exceptions to this rule, including:

You die or become disabled
You experience certain financial hardships
You leave your job during or after the year you turn 55 (Rule of 55)

If you are eligible to cash out your 401(k) penalty-free, your withdrawals may still be subject to federal and state income taxes.

Taxes on 401(k) withdrawals

The federal government considers funds from a traditional pre-tax 401(k) plan as ordinary income, meaning you must pay taxes on any pre-tax funds you withdraw. Withdrawals from traditional 401(k)s are subject to your current federal and state income tax rate.

Additionally, cashing out a traditional 401(k) increases your taxable income for the year in which it was withdrawn. Depending on the amount withdrawn, this could push part of your income into a higher tax bracket and increase your tax bill.

Qualified¹ withdrawals from a Roth 401(k) are generally tax-free. To qualify, the account must have been open for at least five years and the withdrawal must occur after age 59½, due to disability, or after the account owner's death.

Compound growth

Withdrawing from your 401(k) early can reduce the power of compounding by removing money that may otherwise continue generating returns over time. Because future earnings can build on both your original contributions and any investment gains, even a single early withdrawal can have a larger long-term impact than the amount you take out today.

For example, say you make an early withdrawal of $20,000 from your 401(k). You’ll not only have $20,000 less at the time of your retirement, but you’ll miss out on any potential earnings that may have accumulated if the money remained invested.

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 help determine your estimated net withdrawal amount after taxes and penalties.

Learn more: Get personalized retirement advice today.

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FAQs

Is cashing out a 401(k) after leaving a job the right decision?

Cashing out after leaving a job is not the only option. Rolling over your 401(k) to an IRA or your new employer's 401(k) plan is one way to maintain your retirement savings. Moving these funds to an IRA or employer-sponsored plan will allow you to continue making contributions while allowing this money to grow until retirement. You can also choose to leave these funds alone, although, in 401(k)s, you will no longer be able to contribute to the account once your employment ends.

What taxes on 401(k) withdrawals do I pay after 59 ½?

Withdrawals made from pre-tax 401(k)s — at any age — are taxed as ordinary income. In other words, they are subject to federal and state income taxes based on your tax bracket at the time. Pre-tax 401(k) withdrawals may also push you into a higher tax bracket depending on your situation. Because contributions to Roth 401(k)s are made on an after-tax basis, qualified withdrawals are not typically subject to income taxes.

How many years will my money last in retirement?

How long your retirement savings will last depends on several factors. Having sources of additional income, such as Social Security and other investments, may reduce the need to take distributions from your retirement accounts. Your desired retirement lifestyle and spending habits can also impact how long your funds will last.

1 Roth withdrawals are federally tax-free if they are qualified distributions as defined by the IRS. For a distribution to be qualified, the account must have been open for at least five years, and the withdrawal must occur after age 59½, death, or disability. Contributions may be withdrawn at any time without penalty. Earnings withdrawn before those conditions are met may be subject to taxes and penalties. Tax laws are subject to change. State and local taxes may still apply.

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