The IRS does its part to incentivize workers to contribute funds to a 401(k) plan. Not only are contributions to a traditional 401(k) exempt from taxes up to an annual limit, but that limit is fairly generous. This year, it's $23,000 if you're under age 50 or $30,500 if you're 50 or older.

In exchange for its generosity, the IRS wants you to leave your 401(k) plan untouched until retirement age, which it defines as age 59 1/2. As such, if you take a 401(k) withdrawal before reaching that age, you'll risk losing 10% of that sum right off the bat in penalty form.

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Source Fool.com