Can I withdraw money from my retirement accounts prior to age 59 ½ and avoid tax penalties?

Under limited circumstances you can withdraw money from certain accounts and avoid the 10% early withdrawal penalty. It is important that you work with your Certified Financial Planner™ or tax accountant to confirm that you qualify for one of the exceptions prior to taking a distribution.

  • For a Qualified Plan, exceptions to the 10% early withdrawal penalty are:
    1. Distributions upon death or disability of the participant;
    2. Distributions after separation from service that are part of a series of substantially equal periodic payments over the life of the participant or the joint lives of the participant and the beneficiary;
    3. Distributions after the participant's separation from service, provided the participant reached age 55 before separating from service;
    4. Distributions to a non-participant under a qualified domestic relations order
    5. Distributions not exceeding deductible medical (determined without regard to whether deductions are itemized);
    6. Certain distributions by ESOPs of dividends on employer securities;
    7. Distributions made on account of the IRS's levy against the participant's account;
    8. Qualified hurricane distributions;
    9. Qualified reservist distributions; and
    10. Certain loans from the Qualified Plan.
  • For an IRA account, all of the exceptions listed above apply, except #3. There are also some other exceptions to the 10% early withdrawal penalty that apply to IRA's only:
    1. Distributions used to pay medical insurance premiums of unemployed individuals;
    2. Distributions used to cover qualified education expenses for you, your spouse, child or grandchild;
    3. Distributions of up to $10,000 in your lifetime to cover First-Time Homebuyer Expenses; and
    4. Distributions representing the return of non-deductible contributions.
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