Think Twice Before Taking an Early Withdrawal from a Retirement Plan

Think Twice Before Taking an Early Withdrawal from a Retirement Plan

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If you are in need of cash, early retirement plan withdrawals generally should be a last resort. With a few exceptions, distributions before age 59½ are subject to a 10% penalty on top of any income tax that ordinarily would be due on a withdrawal. Additionally, you will lose the potential tax-deferred future growth on the withdrawn amount.

If you have a Roth account, you can withdraw up to your contribution amount free of tax and penalty. But you will lose out on potential tax-free growth.

Alternatively, if your employer-sponsored plan, such as a 401(k), allows it, you can take a plan loan. You will have to pay it back with interest and make regular principal payments, but you will not be subject to current taxes or penalties.

Please contact us if you have questions about potential taxes and penalties on early retirement plan withdrawals. We also can help you determine if there are better options available for meeting your cash needs. 804.747.0000 | information@keitercpa.com

Source: PDI Global


The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.


About the Author

Keiter CPAs is a certified public accounting firm serving the audittax, accounting and consulting needs of businesses and their owners located in Richmond and across Virginia. We focus on serving emerging growth businesses and companies in the financial servicesconstructionreal estatemanufacturingretail & distribution industries and nonprofits. We also provide business valuations and forensic accounting servicesfamily office services, and inbound international services.

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