If you are not 59 1/2 then you will pay taxes based on your tax bracket plus a 10% penalty. Now there are some conditions where you can take out the money without paying the penalty (but you still pay the tax) including:

Down payment on purchase of primary residence
If you are completely disabled

You should never ever borrow from your 401k if you can help it. It ends up costing you a ton of money. Even loans and credit cards are better than using you retirement account.

My parents are in their early 70's and have seen a big loss in their 401K plans over the past 4 months. They both receive social security checks; however, they also withdraw 2 thousand dollars each month to cover living and medical expenses. They are extremely concerned with the economy today and are worried that if the market continues to decline, the funds in the 401K will not outlive them. Their investment banker has advised them to wait it out but they are concerned that the market will not rebound in time for them to recover their losses, much less leave enough for them to live on. Any advice?

If I withdraw $10000 from my 401K when I am 59 1/2 will I have to pay New State income tax on it

Bandoleer119,

Yes, withdrawals from your 401k are subject to state income taxes. Now what those taxes may be for you, depends on the state you reside in and what other income you may have.