(NewsNation) — It is possible to cancel your 401(k) and cash it out while you’re still employed, but it comes at a cost.

Andrew Latham, a certified financial planner, told InCharge Debt Solutions, “Borrowing from a 401(k) can be a tempting option because it provides access to funds quickly and without a credit check. However, borrowing from your 401(k) should be considered carefully due to the potential impact on your long-term retirement savings.”

Can I withdraw from my 401(k) before I retire?

Technically, you can withdraw from your 401(k) plan before you retire, but only under certain circumstances.

According to Empower, you can withdraw from a workplace retirement plan if:

• You die or suddenly become disabled
• Your plan is terminated and isn’t replaced
• You reach 59 1/2 years old
• You experience a financial hardship

If you are under 59 1/2, you typically can’t take early withdrawals from your 401(k) employer plan. And, if you are able to withdraw, you could still be responsible for penalties and taxes.

What are the penalties for withdrawing 401(k) funds early?

Withdrawing funds from your 401(k) before retirement can end up being pretty expensive. Typically, if you take money out before you turn 59 1/2, Empower says you will likely have to owe the following:

• Federal income taxes that are taxed at your marginal tax rate.
• A penalty of 10% of the amount you withdrew.
• Any state income tax that is relevant.

For example, if you are a single person with an income of $75,000, a withdrawal of $25,000 from your 401(k) would cost you $5,500 in federal income taxes. There will also be a 10% penalty, which would be another $2,500 you would need to pay. So, withdrawing $25,000 early would mean you only actually get $17,000 of it in the end.

You may also have to pay state income tax depending on what state you live in.

Can I withdraw from my 401(k) early without any penalties?

There are some instances where you can avoid the 10% penalty fee, according to Empower. However, you won’t be able to avoid paying any federal or state income taxes owed on the amount you withdraw early.

You can avoid the 10% penalty if:

• You give birth to a child or adopt a child. In this case, you can withdraw up to $5,000 for each qualified birth or for adoption expenses.
• You become disabled or you’re a beneficiary of someone else’s 401(k) who dies.
• You lost income due to a federally declared disaster. In this case, you can take out up to $22,000.
• You are in a domestic violence situation. In this case, you can take out $10,000 or 50% of your balance, whichever amount is lower.
• You have a personal or family emergency. Each individual with a 401(k) can withdraw up to $1,000 each year for these types of emergencies.
• You take multiple equal, equal payments.
• You have medical expenses that weren’t reimbursed and exceed 7.5% of your annual income after taxes.
• You’re in the military and have been called to active duty.
• You leave your job during or after the year you turn 55 years old

Cashing out my 401(k) while still employed

Some employers won’t allow you to take money out of your 401(k) while you’re still employed with the company. You will need to check with the company that administers your plan to see what your options are.

Typically, you will have the option to take out a 401(k) loan, withdraw money due to hardship or do an in-service distribution, according to Yahoo Finance.

If you want to take out a 401(k) loan, you can take a lump sum of your earnings and replace the funds with payments from your paychecks. However, you will have to pay principal and interest in these payments.

Some employers will only allow you to take out money if you are experiencing some type of financial hardship. However, other employers could let you borrow money to buy a home, lease a car or fund another large expense, according to Yahoo Finance.

If you can show you have an immediate need for funds, you could also take from your 401(k). Some examples of hardship include money to avoid foreclosure on your home and a down payment on your first home. However, if you choose a hardship withdrawal, you won’t be able to contribute to your plan for six months.

In-service distributions are rare, according to Yahoo Finance, but this can let you roll your assets over into an IRA. But, you will have larger fees and future distributions could be restricted.

Before making any decisions on your 401(k) or other retirement plans, you should contact a certified financial advisor.