The 401K early withdrawal penalty is a heavy price to pay, that if at all possible, should be avoided.
This fee is paid when you cash out your account before turning 59 years and 6 months old. You can only do this when you’ve reached retirement age (in which case there is no fee) or when you’ve left your current employer. You have a very short amount of time to decide what to do, usually about thirty days. When you leave your job you can decide to leave the money in it’s current plan, rollover to your new employers plan, roll into an IRA (independent retirement account), or cash out.