Understanding Early Withdrawal Penalties for Traditional and Roth IRAs
Wednesday, 28 August 2024, 15:32
What Are Early Withdrawal Penalties?
Early withdrawal penalties apply when you take money out of your IRA before reaching age 59½. Both Traditional and Roth IRAs impose a 10% penalty on earnings, alongside taxable income for Traditional IRAs.
Early Withdrawal from Traditional IRAs
- Penalties: A 10% early withdrawal penalty applies to your taxable income.
- Exceptions: There are certain exceptions, including disability, first home purchase, and higher education expenses.
Early Withdrawal from Roth IRAs
- Growth Tax: You can withdraw contributions anytime tax-free; however, earnings may incur penalties.
- Exceptions: Similar exceptions as Traditional IRAs apply for penalty waivers.
Planning Your IRA Withdrawals
Before withdrawing from your IRA, consider the penalties and tax implications carefully. A well-thought-out withdrawal strategy can help you avoid penalties and sustain your retirement funds.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.