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.