The Rules: Understanding Your 401(k) 23 Age 59½ The IRS says that when you've passed its early-retirement penalty age (age 59½), you may get access to your money, if your employer allows it. It's a good-news-bad-news situation. The bad news: Your employer will withhold 20 percent until tax time. The good news: With age comes the benefit of escaping the 10 percent penalty. Our Advice Need another incentive to save? Beginning in 2002, if you contribute to an IRA or an employer-provided savings plan (a 401[k]­type) you can get up to a $1,000 tax credit in addition to a tax deduction for your contributions! (A tax credit is a dollar-for-dollar reduction in the taxes that you pay; a tax deduction is a reduction in your taxable income.) Before you get too excited, you must earn less than $25,000 if you're single, and $50,000 if you're married, to qualify. In-Service Very few plans offer this feature, but they follow the same rules as hardship withdrawals: Uncle Sam