Early withdrawal

Early withdrawal

Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
On August 22, 2019, the Federal Reserve will conduct a floating-rate offering of term deposits with an early withdrawal feature through its TDF.
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The first set of questions motivating this paper concern whether early withdrawal behavior changed substantially in the period during and following the Great Recession.
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