Yes, under 59.5 years of age and withdrawal from a 401k plan would be subject the 10% early withdrawal penalty (unless an exception applies), and the withdrawn amount will also be taxed at ordinary income rates.
The 20% mandatory rate works like withholding taxes does on your paycheck. It's designed to keep you from incurring underpayment penalties.
If you applied a greater percentage such as 30% and it was too much, then the difference would be refunded to you when you file your tax return in the same way that over withholding works with your paycheck.
Even modest amounts in 401ks can grow to nice sum down the road depending on how old you are. You might try a few online calculators to test how much it would be in the future if you leave it where it is (depending on fees or investment options). Alternatively, you could roll it into an IRA and have greater control of what the funds are invested in.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
