What are the Penalties For Early Retirement Plan Withdrawals?
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Funds from any retirement account may be withdrawn early without a penalty if certain exceptions apply (like $10K for a first-time home purchase, significant medical expenses, etc. – but all exceptions are VERY limiting so don’t count on one applying) OR when the person reaches age 59-1/2.
The penalty is 10% of the amount withdrawn PLUS income tax is paid on the amount withdrawn. If money is withdrawn, it can be returned (or redirected to a different retirement account) within 60 days of withdrawal and the penalty won’t apply. But one day (or minute) past this deadline and the 10% automatically kicks in. So if you’re planning to put money in a retirement account – don’t plan on pulling it out until you reach age 59-1/2 or for the special purposes (first-time home purchase, etc.). Otherwise, you’ll end up paying penalties and tax that far outweigh the benefit of making the contribution. Other penalties for early withdrawal may apply for certain retirement plan types…like the 25% penalty for SIMPLE IRA plans where the early withdrawal occurs within the first 2 years of the plan.
Have more questions? Call (480) 888-7111 today and a member of our friendly team can get you scheduled for a free consultation!