The 401K early withdrawal penalty is a heavy price to pay, that if at all possible, should be avoided. This fee is paid when you cash out your account before turning 59 years and 6 months old. You can only do this when you’ve reached retirement age (in which case there is no fee) or when you’ve left your current employer. You have a very short amount of time to decide what to do, usually about thirty days. When you leave your job you can decide to leave the money in it’s current plan, rollover to your new employers plan, roll into an IRA (independent retirement account), or cash out. When you cash out the 401K early withdrawal penalty takes a great deal of your accounts balance. There are three different parts that must be paid: federal taxes, state taxes, and a ten percent penalty. The federal ppi reclaim tax percentage is determined by your tax bracket, which can be found on your last years tax papers. State tax varies state to state, but is typically somewhere between five to ten percent. When added all together these three parts can amount to thirty to forty percent of the amount you take from the account, plus the money the account would have accumulated up to the point of retirement. If you need money now and see this account as your only option for funding, there are some circumstances where you can use this money and avoid the 401K early withdrawal penalty. If you are in a situation of economic hardship, where you will lose your home or have medical bills, you can fill out economic hardship paperwork and apply to get take some money from the account. You do have to repay this money, though.