5 Things to Try Before Withdrawing Money Early from Your Retirement Account

• Author: Jenny Wolff
• Posted: 2025-09-25

If you’re facing a financial emergency, pulling money out of your retirement account might seem like the only answer. However, doing this before you turn 59½ usually means paying a 10% penalty, plus taxes on the money you take out.

Almost 40% of workers say they’ve had to withdraw from their retirement savings early, often to pay for things like emergency repairs or unexpected bills.

Before dipping into your retirement funds, consider these steps:
 

1. Check Your Employer’s Benefits

Your job may offer benefits that could help you cover costs and save money. Some companies provide pre-tax commuter benefits, wellness stipends, reimbursements for working from home, or technology allowances.

In emergencies, employers might offer hardship grants, employee assistance programs, or even allow pay advances. These perks are sometimes overlooked but can make a difference.
 

2. Find Creative Ways to Boost Your Income

Taking on a side job or freelance work can help you bring in extra cash. You could use your skills for freelance writing, tutoring, design, or other work.

Selling items you no longer need—like electronics, appliances, or clothes—online or at a consignment store is another way to quickly raise money for unexpected expenses.
 

3. Reduce or Pause Your Retirement Contributions

If you’re still putting money into your retirement account, lowering or pausing your contributions could free up cash without having to withdraw funds early.

You can use this extra money to help build up an emergency fund instead.
 

4. Build an Emergency Fund

Having some savings for emergencies is key. Although saving three to six months' worth of living expenses is ideal, any emergency fund—no matter how small—can help you avoid touching your retirement savings for unexpected bills.

Even small regular deposits can add up over time.
 

5. Look into Penalty-Free Options

If you’ve considered all the above and still need money, there may be penalty-free ways to access your retirement savings:
 

• Hardship Withdrawals: You may be allowed to withdraw money from your 401(k) for things like medical bills, buying your first home, preventing foreclosure or eviction, repairing major home damage, education expenses, or funeral costs. These withdrawals are taxed, but you won’t pay the 10% early withdrawal penalty.
• Retirement Account Loans: Some plans let you borrow money from your retirement account. You’ll need to pay it back within five years, plus interest, but you won’t pay extra taxes or penalties as long as you repay it.

It’s important to look at all your options before deciding to take money from your retirement account early.

Exploring employer benefits, building an emergency fund, and finding other sources of income can help protect your retirement savings for the future.

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