Retirement & Savings

What Is an Early Withdrawal Penalty?

An early withdrawal penalty is a charge for taking money out of an account before a specified time. For US retirement accounts, withdrawals before age 59½ are generally subject to a 10% additional tax on top of ordinary income tax, unless an exception applies. For certificates of deposit, the penalty is usually a set number of months of interest.

Common Exceptions

Retirement account exceptions can include disability, certain medical expenses, and some other situations defined in tax law; rules differ between IRAs and employer plans.

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🔗 Related Terms

401(k) Plan Traditional IRA Certificate of Deposit (CD) Roth IRA

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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.