Glossary
Early withdrawal penalty
Definition
The early withdrawal penalty is an additional tax on distributions from retirement accounts taken too early: 10% before age 59½ (age-55 separation-from-service exception for plans)2026 · IRS. It's on top of ordinary income tax, and many exceptions exist.
How early withdrawal penalty works
Exceptions include disability, certain medical expenses, SEPP payments and, for employer plans, separation from service in or after the year you turn 55.
Governmental 457(b) plans aren't subject to it after separation.
Why it matters to a firm
Catching a cash-out before it happens saves clients real money.
| 2026 figure | Source |
|---|---|
| Additional tax on early retirement distributions: 10% before age 59½ (age-55 separation-from-service exception for plans) | IRS |
Calculators that use early withdrawal penalty
Questions about early withdrawal penalty
What is the penalty?
10% before age 59½ (age-55 separation-from-service exception for plans)2026 · IRS.
Does the age-55 rule apply to IRAs?
No.
Are Roth contributions penalized?
Contributions can be withdrawn without tax or penalty.
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Related terms: Substantially equal periodic payments
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