Do you have money in a retirement account you’re itching to get your hands on?
If you’re under age 59 1/2, you typically have to pay a 10 percent penalty tax on early withdrawals. And this penalty tax is in addition to the regular income tax you must pay whenever you withdraw your money from tax-deferred accounts such as traditional IRAs and 401(k)s.
The 10 percent penalty tax applies not onlymb to tax-deferred retirement accounts, but to Roth IRAs as well—but the penalty applies only to withdrawals of Roth account earnings, not contributions. Roth withdrawals are never subject to regular income tax if the account is held for over five years.
Here’s good news. Several exceptions allow for penalty-free withdrawals before age 59 1/2. In fact, as a result of the SECURE 2.0 Act, there are now more ways to withdraw money from a retirement account penalty-free than ever before. We cover those in SECURE 2.0 Adds New Escapes ... Log in to view full article.
