Beware of Early Withdrawal Penalties

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Thinking about pulling money out of your retirement plan early? Below are a few things you should know about early withdrawal.

• An early withdrawal is considered removing money from your retirement account before you reach age 59½.
• If you decided to withdrawal your funds before age 59½, you must report the amount removed to the IRS and you may be subject to a 10% penalty on the early withdrawal.
• You may be able to avoid the 10% penalty for the following reasons:
  • You withdrew money from a retirement account in which you paid taxes on the money before you deposited it.
  • Transferring money from a qualified retirement plan to another retirement plan within 60 days is not subject to income tax or the 10% penalty.
  • Other exceptions may be made, for example, if you need to remove money for certain medical expenses or if a taxpayer is disabled.

For more information, contact your H&S tax professional today.