Once you have set up a retirement account, such as an IRA or 401(k), you will want to maintain your balance and achieve tax-free growth as long as possible. If you have unplanned expenses, you don’t want to withdraw from your retirement account unless there are other viable options.
If you need to withdraw funds from your retirement plan, you need to know how to do so without penalty.
Currently, there are over 20 exceptions to the 10% penalty. Ed Slot, a retirement planning expert, said, “Early withdrawals from retirement accounts should be discouraged as early withdrawals reverse the retirement savings process and early distribution is the most expensive. They are extremely inefficient as they could cover both income tax and early withdrawal penalties of 10%. It would be better to get the necessary cash from a non-taxable account.”
There are three categories of early withdrawal exceptions: Exceptions that apply to both qualified company plans and IRAs. Exceptions that apply only to IRAs. An exception that applies only to company plans.
The exceptions to both IRAS and company planning are: Disability; Rollover; Pension (Rule 72
