Nearly 40% of workers admit they’ve tapped a workplace account early during a cash crunch. That one fact shows how common it is to consider pulling money before the usual age milestones.
Accessing those funds is rarely simple. Rules vary by plan type, by your age, and by whether your reason meets federal hardship standards. Some plans never allow hardship withdrawals at all.
You should expect potential costs: ordinary income tax and, often, a 10% IRS penalty if you take funds before the age threshold. Early withdrawals also cut future compounding and can pause new contributions, which risks missing employer match dollars that grow your savings.
This guide previews key steps: read your plan documents, confirm hardship eligibility, compare other options, and gather correct information so you protect the money retirement savings you’ve built. For related guidance on timing and income strategies, see maximizing benefit timing.
Key Takeaways
- Understand your specific account rules before you act.
- Early access can trigger tax and penalty costs.
- Hardship distributions require narrow, documented reasons.
- Removing funds now reduces long-term compounding.
- Check whether withdrawals temporarily block new contributions.
Understand Your Withdrawal Options Before You Tap Your Retirement Account
Before you tap account funds, take time to learn which choices you can actually use. Review your account documents to see what options are allowed and how quickly requests move. This helps prevent costly mistakes and gives you clear information before you act.
Hardship withdrawals and when they apply
Hardship rules are narrow and set by law, not by personal preference. Typical qualifying reasons include unreimbursed medical bills, certain tuition costs, funeral expenses, and payments to avoid foreclosure or eviction. Costs tied to a primary residence, like a down payment or urgent repairs, may also qualify.
You usually can only take what is needed to address the hardship plus applicable taxes and penalties. Some retirement plans may suspend new contributions for a period after a hardship distribution, which can cost lost employer match or credit.
Unforeseeable emergency standard for certain 457 plans
Governmental 457 accounts use an unforeseeable emergency standard. This can cover serious illness, casualty losses from disasters, or other extraordinary events beyond your control. Your employer and the plan administrator decide eligibility and will tell you what documentation and timeframes apply.
Evaluate options before you act — age and tax rules still affect any distribution and can change how much money you keep.
For alternatives and tax-saving ideas, see top Roth IRA providers.
withdrawing from voya retirement plan: Step-by-step process and eligibility
Begin with a clear check of your account type, service status, and eligibility for hardship access. If you are still employed, rules may differ compared to someone who left service. Knowing the account and employer rules saves time and prevents surprises.
Confirm account type and employer rules
Ask HR or the administrator which features your account allows and whether hardship distributions are an option. Get written information that shows what qualifies and any limits on the amount.
Qualifying reasons and required documentation
Typical qualifying reasons include unreimbursed medical bills, tuition, funeral costs, eviction or foreclosure prevention, and certain primary residence needs like urgent repairs.
Collect invoices, tuition statements, eviction or foreclosure notices, and contractor estimates before you submit a request. Documentation must show the exact amount you need.
How to initiate and timing
Requests usually start through your employer, the plan service center, or the online recordkeeping portal used by the account. Be ready to provide personal information, the reason, and the requested amount.
Ask about processing time, tax withholding, and whether contributions will be suspended for a period after the distribution. Some accounts historically paused contributions for about six months, which can affect your future contributions and employer match.
“Document every step and keep copies of submissions and decisions so you can respond quickly if more information is requested.”
For alternatives and savings ideas, consider reading about top IRA accounts for beginners.
Taxes, penalties, and required minimum distribution rules
Before you request money, understand how the IRS and your recordkeeper will tax and report that payment. Most distributions are taxed as ordinary income, so the withdrawal adds to your taxable income for the year.
Income tax and the early withdrawal penalty
If you take funds before age 59½, many accounts add a 10% early penalty on top of the income tax due. That penalty increases the real cost of accessing cash early.
Federal withholding on direct payments
When a distribution is paid directly to you rather than rolled over, the administrator typically withholds 20% for federal tax. Qualified rollovers avoid this withholding and keep the full amount working for you.
Required minimum distribution at age 73
The IRS generally requires a required minimum distribution starting at age 73 if you are no longer employed and the account doesn’t allow a delay. Missing the minimum distribution can trigger heavy penalties.
Roth IRA differences
Roth IRA contributions can usually be withdrawn tax- and penalty-free. However, early removal of earnings may create income tax and a 10% penalty unless an exception applies.
“Confirm how payments will be coded on tax forms to avoid surprises when you file.”
How withdrawals affect your retirement balance, investments, and employer match
An early distribution cuts principal and interrupts the steady compounding that builds wealth. That immediate drop in your account reduces the base that produces future investment returns.
Lost compounding and reduced future earnings
When you remove money, the remaining balance has less capital to grow. Small shortfalls today lead to much lower investment gains over decades.
Example: missing a decade of compounded returns on a withdrawn dollar often costs far more than the cash you took.
Missed matching contributions and stopped contributions
Many employers pause contributions after hardship events. That pause can mean lost matching contributions—free money that would boost savings and account growth.
Every dollar not contributed and matched reduces the pool that generates earnings and weakens long‑term retirement security.
- Weigh alternatives that preserve compounding before you tap the account.
- Plan to restart contributions promptly if you must take money.
- Revisit asset allocation after a withdrawal to keep risk aligned with your timeline.
| Action | Immediate effect | Impact on account | When to consider |
|---|---|---|---|
| Take distribution | Get cash now | Lower balance, less compounding | Last resort |
| Use Roth IRA contributions | Access contribution basis tax-free | Preserve account investment growth | Good short-term option |
| Home equity line of credit | Borrow against home value | Keep retirement funds invested | Consider if rates and fees are reasonable |
Before acting, compare these options and review your numbers. If you want help choosing the best 401(k) alternative, see top 401k plans for context on savings features and matching contributions.
“If you must remove funds, document the decision and map a restart schedule so you can recapture match and rebuild compounding.”
If you’ve left your job or are still employed: choosing the right option
Deciding what to do with an account after a job change affects taxes, future income, and service credit. Start by listing each available option and how it changes your long-term balance. Small choices now can shape future benefits and required minimum distribution timing.
Separated from service — common choices
If you’ve separated from service, you can usually leave assets in the account, roll them to an IRA or another employer account, retire if eligible, or withdraw the account balance and close the position. Each option has tax and timing consequences.
Still employed — hardship and unforeseeable emergency rules
If you are still employed, hardship or unforeseeable emergency withdrawals may be available depending on the account type. These withdrawals are typically limited to the amount needed and may pause contributions or affect employer matching.
Vesting, service credit, and cashing out vs. keeping benefits
Check vesting rules before you cash out. Some public systems require you to take the full amount and forfeit a pension if you withdraw, while others let vested members keep pension rights even after taking investment contributions.
If you later return to covered employment, many systems let you repay withdrawn amounts with interest to restore service credit and improve future pension calculations.
Recordkeeper update and practical steps
As of July 1, 2025, Voya began servicing certain public accounts such as MSRS. Watch for confirmation notices and follow updated access instructions. Keep contact and beneficiary information current so you don’t miss deadlines or required minimum notices.
| Situation | Common option | Tax / income effect | When to choose |
|---|---|---|---|
| Leave assets in account | Keep investments working | Defers tax until distribution | When you want to preserve growth |
| Direct rollover to IRA | Preserve tax deferral | No immediate income or withholding | To avoid immediate tax and penalties |
| Cash distribution | Take money now | Creates taxable income; possible 10% penalty | Last-resort liquidity needs |
| Return to covered service | Repay to restore credit | Improves future pension calculation | If you plan to regain service credit |
Compare options by tax, timing, and future income effects and consider rolling funds to a roth ira or an IRA to preserve tax advantages. For terms and conditions that may affect your choice, check the terms and conditions.
Conclusion
A well‑informed choice now can preserve earnings and avoid unnecessary taxes later. Confirm your account rules, gather documents, and compare every option before you move money.
Consider the full tax picture: distributions usually count as income and may trigger a penalty if taken before age 59½. A direct payment often has withholding; rollovers can defer income tax and keep investments working.
Weigh short‑term needs against long‑term balance and lost contributions. If you must withdraw funds, document the amount and how payments and withholding will be handled, and plan to rebuild contributions and match.
Explore alternatives such as using a Roth IRA contribution basis or other options, and contact your employer or a professional if you need help. For related strategies, see cryptocurrency IRA options.