Early withdrawal

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Early withdrawal

Early Withdrawal

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, it refers to a withdrawal from a retirement account before the appropriate age (usually 65 or the date of retirement, whichever is later). Early withdrawals are usually assessed a fee to discourage frequent or abusive use. As a result, early withdrawals usually occur when the account holder is in great financial need. An early withdrawal is also called an early distribution or a premature distribution.

Early withdrawal.

If you withdraw assets from a fixed-term investment, such as a certificate of deposit (CD), before it matures, it is considered an early withdrawal.

Similarly, if you withdraw from a tax-deferred or tax-free retirement savings plan before you turn 59 1/2, in most cases, it's considered early.

If you withdraw early, you usually have to pay a penalty imposed by the issuer (in the case of a CD) or the government (if it's an IRA or other tax-deferred or tax-free savings plan).

However, you may be able to use the money in your account without penalty under certain circumstances. For example, if you withdraw IRA assets to pay for higher education, to buy a first home, or for other qualified reasons, the penalty is waived. But taxes will still be due on the tax-deferred portion of the withdrawal.

References in periodicals archive ?
Early withdrawals from retirement accounts are a double-edged sword, because withdrawals reduce retirement resources, but they also allow individuals to smooth consumption when they experience demographic and economic shocks.
As long-term savings, 401(k) plans are not intended to be accounts from which contributors can make early withdrawals.
Taking out loans and early withdrawals can severely inhibit the long-term growth of retirement accounts," she adds.
When financial times get tough, some people make regrettable decisions, like taking early withdrawals from 401(k) accounts.
The change in the AGI threshold for medical expense deductions may also affect early withdrawals from IRAs and other retirement plans.
Nottingham yesterday saw early withdrawals from the Betfred Eclipse heats with Dalcash Scolari (9.
Notice accounts make you wait or charge an interest penalty for early withdrawals.
Early withdrawals of contributions are tax-free and penalty-free.
Early withdrawals are permitted during the term, but will be charged a fixed flat withdrawal charge (pounds 50 for one-year term, pounds 75 for two-year term, pounds 100 for three-year term).
Russia's Globex has temporarily banned early withdrawals of fixed-term retail deposits as the mid-sized bank tries to conserve cash amid liquidity squeeze, Reuters has reported citing a separate report by Kommersant business daily.
So a wise move may be to open an account that rewards regular savings with higher rates and penalises you if you make early withdrawals.

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