The Real Cost of Early Withdrawals
While it might be tempting to use retirement funds for immediate needs, the costs are high. In addition to regular income tax, you usually face a 10% early withdrawal penalty if you are under age 59½.
Exceptions to the Penalty
There are some situations where the 10% penalty might be waived, such as:
- First-time home purchase (up to $10,000)
- Qualified higher education expenses
- Certain medical expenses or health insurance premiums while unemployed
- Birth or adoption expenses (up to $5,000)