Early Withdrawals and Required Minimum Distributions
What it costs to take money out of a retirement account before age 59½, the main exceptions, how plan loans work, and the rules that require withdrawals later in life.
The short version
Withdrawals from most retirement accounts before age 59½ owe an additional 10% tax on top of regular income tax, unless an exception applies. Exceptions include disability, certain medical costs, up to $5,000 per child for a birth or adoption, and, for IRAs only, up to $10,000 for a first home. Many workplace plans offer loans instead, which you repay with interest. At the other end, most accounts require minimum withdrawals each year from age 73, calculated from the prior year-end balance and an IRS life expectancy factor. Roth IRAs and Roth 401(k)s have no required withdrawals during the owner's lifetime. Missing one can cost a 25% excise tax.
By the end of this lesson, you'll be able to
- Work out the cost of an early withdrawal and name the main exceptions
- Describe how a retirement plan loan works and its limits
- Explain when required minimum distributions start, how they're calculated, and which accounts are exempt
Why this matters
Retirement accounts have rules at both ends. Take money out too early and it usually costs extra. Leave it in too long and the IRS eventually requires you to start taking it out. Knowing both sets of rules helps you avoid an expensive surprise, and shows why an emergency fund outside these accounts is worth having.
Withdrawing before 59½
Withdrawals from an IRA or workplace plan before age 59½ are called early distributions. Unless an exception applies, they owe an additional 10% tax,1 the Early distribution tax. An additional 10% tax on most withdrawals from retirement accounts before age 59½, on top of regular income tax, unless an exception applies. Glossary, on top of the regular income tax on any pre-tax money withdrawn.
| Withdrawal | $10,000 |
|---|---|
| Income tax at an assumed 22% rate | −$2,200 |
| Additional 10% tax | −$1,000 |
| What you keep | $6,800 |
Before any state income tax. And the $10,000, along with decades of growth it might have had, is no longer saved for retirement.
The main exceptions
The IRS lists a number of situations where the additional 10% doesn't apply. Some apply to both IRAs and workplace plans, some to only one. Regular income tax still applies to pre-tax money in every case.
| Exception | Workplace plans | IRAs |
|---|---|---|
| Total and permanent disability | Yes | Yes |
| Unreimbursed medical expenses above 7.5% of adjusted gross income | Yes | Yes |
| Birth or adoption, up to $5,000 per child | Yes | Yes |
| One emergency expense a year, up to $1,000 | Yes | Yes |
| A series of substantially equal payments | Yes | Yes |
| Leaving the employer in or after the year you turn 55 | Yes | No |
| First home purchase, up to $10,000 | No | Yes |
| Qualified higher education expenses | No | Yes |
| Health insurance premiums while unemployed | No | Yes |
Each exception has detailed conditions; the IRS's full list has more.1
Two other routes are worth knowing. Distributions from a governmental 457(b) plan generally aren't subject to the additional 10% at all.2 And money you contributed to a Roth IRA, as opposed to its earnings, can be withdrawn without tax, because it was taxed before it went in.3
The rest of this lesson is for members
Still to come in this lesson: Borrowing instead, Required minimum distributions, the key takeaways, and 2 quiz questions with explanations.
Membership opens every lesson in the curriculum, the capstone projects, the interactive tools, and the members-only channels in the Hyperion Entities Discord. The first lesson of every module stays free.
Go deeper
- Rollovers and Changing JobsPart 6: Strategy, Behavior, Accounts, and Taxes
- Required Minimum Distributions in Depth coming soonInvesting Through Retirement (depth track)
- Tax-Efficient Withdrawals coming soonInvesting Through Retirement (depth track)
Notes and sources
- Internal Revenue Service. Retirement topics: Exceptions to tax on early distributions. Checked 2026-09-26. Back to text
- Internal Revenue Service. Topic no. 558, Additional tax on early distributions from retirement plans other than IRAs. Checked 2026-10-06. Back to text
- Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs). Checked 2026-10-06. Back to text
- Internal Revenue Service. Retirement topics: Loans. Checked 2026-10-06.
- Internal Revenue Service. Retirement plan and IRA required minimum distributions FAQs. Checked 2026-10-06.
- Legal Information Institute, Cornell Law School. 26 U.S. Code § 401, Qualified pension, profit-sharing, and stock bonus plans (applicable age, § 401(a)(9)(C)(v)). Checked 2026-10-06.