Making Your Retirement Stream Last

Early Withdrawals

Most qualified retirement plans, tax sheltered annuities (TSAs), and IRAs allow withdrawals, without penalty, upon attaining age 59½. But there is a 10% penalty tax on withdrawals made before age 59½ (if the funds are not rolled over) from qualified retirement plans, TSAs, and IRAs, unless the distribution is made under one of the limited circumstances allowed by law. These include:

  • distributions made after separation from service with your employer during or after the year in which age 55 is attained (this rule doesn't apply to IRAs);
  • distributions made due to disability or after the employee's death;
  • distributions for qualified medical expenses that exceed 10% of adjusted gross income (7.5% in 2019);
  • distributions after separation from service that are part of a scheduled series of substantially equal periodic payments (the separation from service requirement does not apply to IRAs);
  • distributions from an IRA to pay for qualified higher education expenses;
  • distributions from an IRA to a qualified first-time homebuyer up to a $10,000 lifetime limit;
  • distributions to an "alternate payee" under a divorce court order (i.e., QDRO).
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