How to Withdraw Money From a 401k. Your desire to stow away part of your income for retirement may be dampened by short-term needs. You may need extra money for a major purchase, legal fees, medical costs or other large expenses that cannot be covered by your regular income. You need to withdraw money from your 401k with an eye toward federal regulations and long-term repercussions.

Step 1

Read through your 401k plan information to determine possible loan options. Loans through your retirement account provide money for certain kinds of emergencies that can be repaid through paychecks over a matter of 5 years. These loans do not have the penalties or taxes associated with a regular withdrawal.

Step 2

Learn the number of withdrawals you can make from your 401k in a given year. The account manager and your employer may set a limit on cash withdrawals to encourage responsible saving for retirement. A low number of withdrawals means it is advisable to make one transaction for a fiscal year to minimize the withdrawal penalty.

Step 3

Research the withdrawal limits of your 401k plan in order to decrease the penalty assessed on withdrawn funds. You should use this upper limit, along with available funds from other accounts, to get enough money for your immediate needs.

Step 4

Use 401k withdrawals to pay for a down payment on your first home to avoid penalty. Down payments and closing costs for your first home falls under the Internal Revenue Service's definition of hardship for 401k accounts. Loans and withdrawals for home owners are given lenient standards by Congress to encourage housing expansion.

Step 5

Extract money from your 401k with no penalty to avoid eviction from your residence. The immediacy of this type of expense, along with the need for an employee to have a residence in order to work effectively, make this another type of financial hardship regulated by the IRS.

Step 6

Pay for your education without penalty when you withdraw funds from your 401k. The federal government allows workers to return to school by applying no penalties to retirement funds used for college tuition, up to a certain level.

Step 7

Pay medical costs not covered by insurance by removing money from your retirement account. You can withdraw money from your 401k to pay bills accrued during surgeries and emergency procedures that are not sufficiently paid for by your insurance plan.