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Early Withdrawal Penalty |
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Early withdrawal penalty Penalty paid by the holder of a fixed-term investment penalizing an investor who withdraws money before the agreed-upon maturity date. Early Withdrawal Penalty A fee assessed on the withdrawal of funds from a fixed-income investment before the prescribed time. Early withdrawal may come from a certificate of deposit before its maturity. More often, however, early withdrawals refer to withdrawals from a retirement account before the appropriate age (usually 65 or date of retirement, whichever is greater). Early withdrawal penalties exist to discourage the frequent or abusive use of early withdrawals. As a result, early withdrawals usually occur when the account holder is in great financial need. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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The IRA owner is taxed on the entire accumulated value of the plan, plus the 10% early withdrawal penalty applies if the individual is under age 591/2 IRC section 72(t) provides for 16 exemptions from the early withdrawal penalty (see exhibit 1, page 49), eight of which relate to life cycle crises. The unpaid balance of the loan you took out against your 401(k) will be counted as a distribution, which means you will have to pay a 10% early withdrawal penalty for taking money out before age 59 1/2, plus any income tax the balance has accrued. |
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