Retirement Plan – Early Withdrawals

Penalties for Withdrawals before 59 ½

Traditional IRA

Penalty: 10% (in addition to the regular tax on the distribution)

Exceptions to the penalty: death, disability, medical expenses over 10% AGI, college for self, spouse, child or grandchild, first time homebuyer ($10,000 limit), annuity payout over life expectancy

Roth IRA

Penalty: 10% on the earnings (never the principle contributed). A Roth requires a five-year holding period before distributions, even if over age 59 ½. Since Roth money has already been taxed, there is no penalty for anyone until total withdrawals exceed total contributions.

Exceptions to the penalty: death or disability, first time homebuyer ($10,000 limit)

SEP IRA

Penalty: 10% penalty (in addition to the regular tax on the distribution)

Exceptions to the penalty: death or disability, first time homebuyer ($10,000 limit)

SIMPLE IRA

Penalty: 10% penalty (in addition to the regular tax on the distribution) UNLESS it’s within the 2-year holding period, then it’s a 25% penalty

Exceptions to the penalty: death, disability, medical expenses over 7.5% AGI,- college for self, spouse, child or grandchild, first time homebuyer ($10,000 limit), annuity payout over life expectancy

401-K

Penalty: 10% penalty (in addition to the regular tax on the distribution)

Exceptions to the penalty: death, disability, severance from employment after age 55, financial hardship, medical expenses, qualified reservist

Roth 401-K

Penalty: 10% on the earnings (never the principle contributed). A Roth requires a five-year holding period before distributions, even if over age 59 ½ Since Roth money has already been taxed, there is no penalty for anyone until total withdrawals exceed total contributions

Exceptions to the penalty: death, disability, severance from employment after age 55, financial hardship, medical expenses, qualified reservist