Knowing when to withdraw from a 401K account is extremely important knowledge for your retirement plan. The real short answer to this question is not until you reach retirement age, which is 59 years and 6 months of age, however, there is really more that you should know than that.

First of all, you can start to take payments when you reach retirement age (59 and 1/2 years old) and you have to start taking payments before you are seventy years old.

When the economy is in bad shape and you are watching your savings plummet, however, it is easy to think you should go ahead and get your money now. This idea has some serious consequences, however. You will have to pay both federal and state taxes on the money you take out, plus a ten percent early withdrawal fee-this amounts to a great deal of money, plus the money you are missing out on that you would have accumulated up to the point of retirement.

Of course, if you are watching your balance drop, you may decide this is worth it. Most financial professionals, however, will strongly advice you against this at any cost, and will advice you to possibly switch your investment plans, and stick with it.

If you decide to go through with this and are younger than retirement age things are much more complicated.

You cannot take any money from the account at any time you want, you can only do this immediately after you have left a job. At this point you have four options, you can roll it into a plan with your new employer, roll it into an IRA, leave the money where it is, or cash out.

There are of course exceptions to this rule under extraordinary circumstances.

Knowing how and when to withdraw from a 401k account is extremely important, especially for avoiding high penalties and losing your retirement savings. Deciding to cash out is a big decision, and one you'll want to talk about with a financial professional and be very informed about.