The basic withdrawal process at Fidelity

To withdraw money from a Fidelity 401(k), you log into your Fidelity account online, navigate to the "Withdrawals" section under your plan, and request the amount you want to take out. Fidelity will then walk you through a series of questions about the type of withdrawal — whether it's a regular distribution, a hardship withdrawal, or a loan — because the rules and tax treatment differ for each. The entire process typically takes 5 to 10 business days from the time you submit your request to when the money reaches your bank account.

Before you start, understand that withdrawals from a traditional 401(k) are taxed as ordinary income in the year you withdraw them, and if you're under 59½, you'll owe a 10 percent early withdrawal penalty on top of income tax — unless you meet a specific exception. Roth 401(k) withdrawals follow different rules: you can withdraw your contributions tax-free at any time, but earnings are taxed and penalized if you're under 59½ and haven't had the account for five years. Fidelity's system will show you the tax withholding amount before you confirm the withdrawal.

Key Takeaways

  • Withdrawals from a traditional 401(k) before age 59½ are subject to a 10 percent penalty plus income tax, unless you meet an exception like disability or a hardship withdrawal.
  • Fidelity processes most withdrawal requests within 5 to 10 business days, and you can request the withdrawal online through your account dashboard.
  • Hardship withdrawals require you to prove financial hardship and are limited to the amount needed to resolve the hardship; Fidelity will ask for documentation.
  • A 401(k) loan lets you borrow from your own balance without triggering taxes or penalties, but you must repay it on a set schedule or face tax consequences.
  • If you leave your job, you have options: leave the money in the plan, roll it to an IRA, or withdraw it — each with different tax and penalty rules.

Withdrawals before age 59½ and the 10 percent penalty

If you're under 59½ and withdraw from a traditional 401(k), the IRS charges a 10 percent early withdrawal penalty on the amount you take out, in addition to ordinary income tax. So if you withdraw $10,000 and you're in the 22 percent tax bracket, you'd owe $2,200 in income tax plus $1,000 in penalty — a total of $3,200 in taxes and penalties on that $10,000. Fidelity will withhold these amounts before sending you the money, so you'll receive less than you requested.

The penalty does not apply if you meet one of the IRS exceptions: you're disabled, you're withdrawing for medical expenses that exceed 7.5 percent of your adjusted gross income, you're a reservist called to active duty, you're unemployed and using the money for health insurance premiums, or you're taking a series of substantially equal periodic payments (a complex calculation Fidelity can help you with). Hardship withdrawals — for things like preventing eviction, paying medical bills, or covering education costs — are also exempt from the penalty, though they are still subject to income tax.

Hardship withdrawals and what Fidelity requires

A hardship withdrawal lets you take money out before 59½ without the 10 percent penalty, but only if you can prove you have an immediate and heavy financial need. Fidelity recognizes hardships including preventing foreclosure or eviction, paying unreimbursed medical or dental expenses, paying tuition and education fees, paying for home repairs after a casualty loss, and paying for funeral or burial expenses. You cannot take out more than the amount needed to cover the hardship and any taxes owed on the withdrawal.

When you request a hardship withdrawal through Fidelity, you'll be asked to certify that you have a may have access to hardship and that you've exhausted other resources first — like taking a loan against the plan or using savings. Fidelity may ask for supporting documents: a notice of foreclosure or eviction, medical bills, tuition statements, or a death certificate. The review process typically takes 5 to 10 business days. Once approved, the money is treated as a taxable distribution, so you'll owe income tax but not the early withdrawal penalty.

401(k) loans as an alternative to withdrawal

Instead of withdrawing, you can borrow from your 401(k) balance. A 401(k) loan lets you take up to 50 percent of your vested balance (or $50,000, whichever is less) and repay it over five years with interest. The interest rate is set by Fidelity and is typically 1 to 2 percentage points above the prime rate. Because you're borrowing your own money, there's no income tax or early withdrawal penalty, and the interest you pay goes back into your own account.

The catch is that if you leave your job or are laid off, you typically have to repay the loan within 60 to 90 days or it's treated as a withdrawal — meaning you'll owe income tax and the 10 percent penalty if you're under 59½. Fidelity will explain the repayment terms and timeline when you apply for the loan. A loan makes sense if you need money temporarily and plan to stay employed, but it's riskier if your job is unstable.

What happens when you leave your job

If you leave your employer, you have four options for your 401(k): leave it with Fidelity (if your balance is above the plan's minimum, usually $1,000 to $5,000), roll it into an IRA at Fidelity or another institution, roll it into your new employer's 401(k) if they allow it, or withdraw it. Each option has different tax consequences. A rollover to an IRA or new 401(k) avoids taxes and penalties entirely. A withdrawal triggers income tax and the 10 percent penalty if you're under 59½, unless you meet an exception.

Fidelity will send you information about your options when you separate from your employer. If you do nothing, the plan may force out your balance — typically by rolling it into an IRA or sending you a check — depending on the plan rules and your balance size. The forced rollover route is usually the best option if you're unsure, because it preserves the tax-deferred status of the money and gives you time to decide what to do next.

Taxes and withholding on your withdrawal

When you request a withdrawal, Fidelity is required by the IRS to withhold taxes. For a regular distribution, the withholding is 20 percent of the amount you withdraw. For a hardship withdrawal or a withdrawal after you leave your job, the withholding is also 20 percent unless you request a different amount. This withholding is sent to the IRS on your behalf and credited against your tax bill for the year.

The 20 percent withholding is not the same as your actual tax bill. If you're in a higher tax bracket, you may owe more when you file your return. If you're in a lower bracket or have other deductions, you may get a refund. Fidelity will show you the withholding amount before you confirm the withdrawal, so you can see exactly how much money you'll receive. If you want to withhold more or less, you can request a different amount — though the IRS has rules about minimum withholding for certain types of withdrawals.

How to request a withdrawal online through Fidelity

Log into your Fidelity account on the Fidelity website or mobile app. Navigate to your 401(k) plan and look for a link labeled "Withdrawals," "Distributions," or "Take Money Out." Click it and select the type of withdrawal you want: a regular distribution, a hardship withdrawal, or a loan. Answer the questions Fidelity asks — these will vary depending on the withdrawal type and your age.

Enter the amount you want to withdraw and review the tax withholding estimate. Fidelity will show you the gross amount, the taxes and penalties withheld, and the net amount you'll receive. Confirm your bank account information so Fidelity knows where to send the money. Submit the request. You'll receive a confirmation email, and Fidelity will process the withdrawal within 5 to 10 business days. If Fidelity needs more information — like documentation for a hardship withdrawal — they'll contact you by email or phone.

Frequently Asked Questions

Can I withdraw from my 401(k) if I'm still employed?

Yes, but the rules depend on your plan. Most plans allow regular distributions only after age 59½, but many allow hardship withdrawals or loans at any age. Some plans offer "in-service withdrawals" for employees still working, though this is less common. Log into your Fidelity account or call Fidelity to ask what your specific plan allows.

What's the difference between a withdrawal and a rollover?

A withdrawal takes money out of the 401(k) and sends it to you; you owe income tax and possibly a 10 percent penalty. A rollover moves the money directly from your 401(k) to an IRA or another 401(k) without you touching it; no taxes or penalties apply. A rollover preserves the tax-deferred status of the money.

How long does Fidelity take to process a withdrawal?

Most withdrawals are processed within 5 to 10 business days from the date you submit your request. Hardship withdrawals may take longer if Fidelity needs to review documentation. Once processed, the money is deposited into your bank account within 1 to 3 business days depending on your bank.

What if I need the money before 59½ but don't have a hardship?

You can take a regular withdrawal, but you'll owe income tax plus a 10 percent penalty. Alternatively, you can take a loan against your balance, which has no tax or penalty but must be repaid. You can also explore whether you meet one of the IRS exceptions, like disability or a series of equal payments.

Do I have to withdraw all my money at once?

No. You can request partial withdrawals over time. Each withdrawal is processed separately and has its own tax withholding. This can be useful if you want to spread out the tax impact across multiple years, though Fidelity may have limits on how often you can withdraw.