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What is an early withdrawal penalty?
Early withdrawal penalty
An early withdrawal penalty is an extra tax on money taken out of a retirement account, like a 401(k) (definition, opens in a new tab), before the age the rules allow. On top of the penalty, the withdrawal is usually taxed as income. Some exceptions apply, so the plan's rules are worth checking first.
Example
Under age 59½, a $10,000 401(k) withdrawal owes $1,000 in penalty, before any income tax.
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General education, not financial advice.