401K plans are a wonderful invention of the U.S. Congress, circa 1978. In short, they allow a worker to save for retirement, having the savings invested while deferring current income taxes on that saved money until later withdrawal. For employees of companies that offer 401K plans, they can choose to have their wages paid directly into the account. Some employers even match part or all of the employee's contribution.

If you have a 401K and are finding yourself facing money troubles, you may be wondering what the rules are about tapping into some of that cash. As you probably already know, virtually all employers have severe restrictions in place concerning withdrawals. The heaviest restrictions are for those people who are still with the company and are under the age of 59 1/2.

If you are wondering, "When can I take money out of my 401K," here are the facts:

Fact #1: You may start taking money out of your 401K at age 59 1/2 without paying penalties:

Once you reach the age of 59 1/2, you may start withdrawing funds from your 401K. You still must pay taxes on the income at the standard income tax rate, however. Remember, the money in your 401K represents deferred income, not tax-free income.

However, if you want to withdraw from your plan before that age, you will be subject to a 10% excise tax - along with owing income taxes on the money, of course.

Fact #2: You are required to start taking money out at age 70 1/2 or after retiring:

Account owners are required by law to start withdrawing from their accounts by April 1 of the calendar year after turning 70 1/2 (or by April 1 of the calendar year after retiring, whichever comes later). The distribution amount varies and is based upon life expectancy tables created by the IRS.

Fact #3: You can borrow up to 50% of your vested 401K balance:

Depending upon your plan, you may be eligible to take out a loan against your 401K. This usually requires a $1,000 minimum loan amount. You must pay a reasonable rate of interest on this loan. However, the interest paid goes right back into your account - so, you are effectively paying yourself this interest. There is a maximum payback period of five years and payment amounts must be equal and evenly spread out (e.g., quarterly).

Fact #4: There are exceptions to the 10% early-distribution penalty:

In some cases, you do not have to pay a penalty for withdrawing money early from your account. Such reasons include: the employee's death, the employee's total and permanent disability, separation from service in or after the year the employee reached age 55, a qualified domestic relations order, and for deductible medical expenses (exceeding the 7.5% floor). Note that some employers may disallow one, several, or all of these "hardship causes."

Know the facts about your 401K and you will be prepared to access the money in your account at the most appropriate time and in the way most beneficial to you.