what is penalty for 401k early withdrawal
10% Penalty for Early 401k Distributions â The main 401k withdrawal penalty is the 10% additional tax that is incurred for taking an âearly distributionâ. An early distribution occurs when 401k funds are withdrawn before reaching age 59-1/2.The 10% penalty is in addition to the regular income taxes that must be paid on amounts withdrawn. (Remember: you did not pay income tax when you contributed funds to the 401k plan so the IRS gets its share when you take money out.).n early distribution occurs when 401k funds are withdrawn before reaching age 59-1/2. The 10% penalty is in addition to the regular income taxes that must be paid on amounts withdrawn. (Remember: you did not pay income tax when you contributed funds to the 401k plan so the IRS gets its share when you take money out.).