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.
References in periodicals archive ?
Facts: Rhandall and Barbara Thorpe filed tax returns for eight years between 2002-2013 in which they calculated and paid individual retirement account (IRA) early-withdrawal penalties. The returns were prepared with the aid of professionals and duly sworn and subscribed.
Compared with quarterly CDs that currently yield around 0.75 percent APY or less, CNote offers a significantly higher APY of 2.75 percent without any fees, early-withdrawal penalties or minimums -- all while investing in economic growth in communities that need it the most.
Under the deemed distribution rules, the participant would be taxed on the excess portion, potentially with early-withdrawal penalties, as if a distribution was received.
If you are the non-spousal designated beneficiary of a deceased person's IRA, amounts you withdraw from the inherited IRA are not subjected to early-withdrawal penalties. To ensure that the IRS knows that the amount is not subjected to the early-withdrawal penalty, your IRA custodian/trustee should report the withdrawn amounts as death distributions.
The 401(k) assets are then used to repay the loan as well as any taxes and early-withdrawal penalties. The employee retains the balance of the 401(k) employer matching contributions.