The two things that can hit a withdrawal
A 401(k) withdrawal is taxed as ordinary income, at your regular tax bracket — there's no special lower rate. If you're also under age 59.5, a separate 10% early-withdrawal penalty usually applies on top. The calculator above estimates both.
Why the withholding surprises people
Employers are generally required to withhold 20% for federal taxes on a 401(k) distribution paid directly to you, whether or not that matches your real tax bill. If your bracket is lower, you get some back at tax time; if it's higher, you'll owe more in April. This is separate from the 10% penalty, which withholding doesn't automatically cover.
Ways to reduce or avoid it
A direct rollover to an IRA or new employer's 401(k) avoids both the withholding and any current tax entirely — the money keeps growing tax-deferred. If you're 55 or older and leaving that employer, the Rule of 55 can waive the 10% penalty on that specific 401(k). The 72(t) SEPP rule is another penalty-free path if you're committed to a fixed payment schedule.
Common questions
Does this apply to a Roth 401(k)? No — qualified Roth withdrawals are tax-free; this is for traditional, pre-tax 401(k)s.
What if I'm laid off at 45? The income tax still applies, and usually the 10% penalty too, unless an exception like disability applies.
Is a loan the same as a withdrawal? No — a 401(k) loan you repay isn't taxed as a withdrawal, but defaulting on it can be treated as one.