Withdrawing funds from a tax-deferred retirement account before age 59½ generally triggers a 10 percent federal income tax penalty; all distributions are subject to ordinary income tax. However, there are certain situations in which you are allowed to make early withdrawals from a retirement account and avoid the tax penalty.
IRAs and employer-sponsored retirement plans have different exceptions, although the regulations are similar.
The death of the IRA owner: Upon your death, your designated beneficiaries may begin taking distributions from your account. Beneficiaries are subject to annual required minimum distributions.
- Written by Charles Sims Jr.