401kFrequently Asked Questions
Short, direct answers to the most common questions about 401(k) taxation. Each links to a fuller explanation.
Reviewed January 2026 against current IRS guidance.
At what age can I withdraw from my 401(k) without penalty?
Generally age 59½. If you separate from the employer sponsoring the plan in or after the year you turn 55, you may be able to withdraw from that specific employer's 401(k) penalty-free even earlier, under the “rule of 55.” Several other exceptions can also apply regardless of age — see early withdrawal penalty for the full list.
How much can I contribute to a 401(k) each year?
The employee elective deferral limit and the combined employer-plus-employee limit both adjust for inflation most years, with higher limits available once you turn 50, and a larger “super” catch-up amount for ages 60 through 63 starting in 2025. See contribution limits for current figures.
What's the difference between a traditional and a Roth 401(k)?
A traditional 401(k) is funded with pre-tax money and taxed as ordinary income when withdrawn. A Roth 401(k) is funded with after-tax money, and qualified withdrawals — including all the growth — come out completely tax-free. See traditional vs. Roth 401(k).
At what age do I have to start taking money out of my 401(k)?
Required minimum distributions generally must begin at age 73 for most people currently reaching that age, rising to 75 starting in 2033, under changes made by the SECURE 2.0 Act. The exact age depends on your birth year. See required minimum distributions.
Can I roll my 401(k) into an IRA without paying tax?
Yes, if it's done as a direct (trustee-to-trustee) rollover from a traditional 401(k) into a traditional IRA, or Roth 401(k) into a Roth IRA. Rolling pre-tax money into a Roth account is a taxable Roth conversion. See rollover rules.
What happens to my 401(k) loan if I lose or leave my job?
The outstanding balance generally must be repaid by your federal tax filing deadline (including extensions) for that year, or it's treated as a taxable distribution and may be subject to the 10% early withdrawal penalty if you're under 59½. See 401(k) loans.
How is an inherited 401(k) taxed?
Distributions are taxed as ordinary income to the beneficiary (for a traditional account), and most non-spouse beneficiaries must fully empty the account within 10 years of the original owner's death under the SECURE Act's “10-year rule.” Spouses and a few other “eligible designated beneficiaries” have more flexible options. See inherited 401(k) rules.
Does my state tax 401(k) withdrawals?
It depends entirely on your state. Some states have no income tax at all, some fully or partially exempt retirement income, and others tax 401(k) withdrawals the same as any other income. See state taxes on 401(k) withdrawals.
What happens if I contribute more than the annual 401(k) limit?
The excess is taxable income and generally must be withdrawn, along with any earnings on it, by April 15 of the following year to avoid being taxed twice. See correcting excess contributions.
Is a hardship withdrawal the same as a 401(k) loan?
No. A loan is repaid back into your own account and generally isn't taxed if repaid on schedule. A hardship withdrawal is never repaid and is fully taxable in the year taken, and may also be subject to the 10% early withdrawal penalty. See hardship withdrawals.