I am in a 401K plan at my work and have been advised our company does not have it where you can get a loan. I need to make withdrawl funds from my 401k to handle some legal fees for a custody battle. Can I just and pay a penalty?

If you have to withdraw funds, you need to pay a 10% penalty of the amount withdrawn. In addition, the amount will also be included as part of your taxable income for the year. Generally 20% will be withheld to be used against your tax liability.

That is what I thought but I was advised since I am an active employee I can withdrawl money from my 401k. I am vested and have 20,000 int the 401k now, only wanting to take a portion. Thanks Bridget

Oops should have been cannot withdrawl funds from my 401k (being an active employee) is this correct?

That is generally not correct. Unless your plan has a specific provision against in service withdrawals which I believe is illegal. Withdrawing from a 401K is highly discouraged, but it can be done with penalites.

It might be that you can't withdraw just a portion. Its possible the plan prohibits any but a full withdrawal. But I doubt that.