What is the best way to withdraw 401k, when withdrawing before retirement?

The best way to withdraw money from your 401(k)? Do a direct rollover to an IRA. However, I assume from the question that you are not asking about a rollover, but rather are interested in getting your hands on some money, correct?

In that case the best way if you are under 59-1/2 years of age is to take out a loan against the 401(k), if your plan allows it. Over time you pay yourself back. Once you've paid back the loan you can start contributing to the 401(k) again.

If that doesn't work, then the only option is to have the administrator send you a check for your withdrawal. You will have to pay federal and state income taxes on the withdrawal, plus 10% of the withdrawal amount as a penalty of you are under 59-1/2.