Penalties for Taking Money out of a Retirement Account
If you take money out of a 401(k) retirement account or a traditional IRA before age 59 1/2, you’ll usually pay a 10 percent penalty, according to the IRS. That’s on top of the income taxes that apply to withdrawals. If you have a Roth IRA or Roth 401(k), you can usually withdraw your contributions — the money you paid in — without penalty, but a 10 percent penalty will usually apply to any earnings taken out before age 59 1/2.
Depending on your account and your circumstances, you might be able to get penalties waived if you take out money for certain expenses, such as medical bills, education costs or the down payment on a home.
Check with your financial advisor or investment officer before making the decision to withdraw early. If there’s a way you can avoid the penalties, it might be better for your personal and financial future.
About the Author
Cam Merritt has been a professional writer and editor since 1992, specializing in articles about personal finance and law and has contributed to “USA Today”. Merritt has a Bachelor of Arts in journalism from Drake University.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.
Published by permission from ConsumerInfo.com, Inc. © 2013 ConsumerInfo.com, Inc. All rights reserved.
