When can I start withdrawing from my 401(k) penalty-free, and does leaving my job change that?

The standard age for penalty-free 401(k) withdrawals is 59 1/2. Take money out before then and you generally owe a 10% early-withdrawal penalty on top of ordinary income tax, with limited exceptions.

One important exception is the Rule of 55: if you leave your job in or after the calendar year you turn 55 (50 for certain public-safety workers), you can withdraw penalty-free from that specific employer's 401(k), though income tax still applies. It only covers the plan at the job you just left, not old 401(k)s or IRAs, and the money must stay in the plan, not be rolled to an IRA, to use it. Other exceptions include disability and qualifying medical costs. Plan withdrawals carefully to avoid unnecessary penalties.