Personal Finance & Estate › Retirement accounts & pensions › Individual Retirement Account (traditional IRA)
10% early-withdrawal penalty & exceptions (before 59½)
Before age 59½· Tax rule
Law or rule (2026)Set by statute, regulation or the agency; numbers change yearly.
A 10% extra federal tax on retirement withdrawals before age 59½, unless an exception applies; California adds 2.5%.
See it on the Personal Finance & Estate map →How it works
The penalty sits on top of regular income tax. Exceptions include death, disability, medical bills above 7.5% of income, a series of equal yearly payments (72(t)), college costs and up to $10,000 for a first home (IRAs only), and leaving a job in or after the year you turn 55 (workplace plans only). SECURE 2.0 added terminal illness, disasters (up to $22,000) and emergencies ($1,000 a year). Roth IRA contributions, not earnings, can always come out free. Main trap: assuming IRA and 401(k) exceptions match.
Why it matters for you
It keeps retirement money locked for retirement; knowing the exceptions avoids a needless 12.5% combined hit in California.
Rules, limits and sources (2026)
IRC Sec. 72(t); the IRS chart 'Exceptions to tax on early distributions'; IRS Form 5329 and California FTB Form 3805P, where the penalties are reported.
Connections (2)
▸10% early-withdrawal penalty & exceptions (before 59½) applies to early withdrawals from Individual Retirement Account (traditional IRA)Law or rule (2026)
How they connect
Taking money out of a traditional IRA before 59½ triggers income tax plus the 10% federal penalty (2.5% more in California) unless an exception applies. IRAs have exceptions 401(k)s lack: up to $10,000 for a first home, college costs, and health premiums while unemployed.
When it applies
Applies under IRC Sec. 72(t) to every IRA; SIMPLE IRA withdrawals in the first two years of participation face 25% instead.
The rule
IRS Form 5329 is where the penalty or an exception is claimed; the IRS exceptions chart lists which apply to IRAs.
Watch out for
Whether the 72(t) equal-payment option is worth its rigidity (breaking the schedule triggers back penalties) is a judgment call for a CPA.
▸10% early-withdrawal penalty & exceptions (before 59½) also applies to 401(k) planLaw or rule (2026)
How they connect
The same 10% penalty applies to 401(k)s before 59½, but the exceptions differ. Workplace plans add the 'rule of 55' for leaving a job at 55 or later, and loans avoid it if repaid. They lack the IRA's first-home and college exceptions. Rolling a 401(k) into an IRA forfeits the age-55 option.
When it applies
IRC Sec. 72(t)(2)(A)(v) sets the age-55 exception (age 50 for public-safety workers); governmental 457(b)s skip the penalty entirely.
The rule
The IRS 'Exceptions to tax on early distributions' chart lists each exception by plan type; claims go on Form 5329.
Watch out for
Hardship withdrawals still owe the penalty unless an exception applies; many workers assume otherwise, and plan rules vary.