How to Avoid Retirement Account Early Withdrawal Penalties

The government does not want you to withdraw money from your IRAs and other retirement accounts before age 59 1/2.

To deter early withdrawals, the government imposes a 10 percent penalty tax, in addition to regular income tax in the case of tax-deferred accounts.

But what if you want to access your retirement funds before age 59 1/2?

You could be in luck. Over the years, Congress has created numerous exceptions to the retirement account early withdrawal penalties. And then, in late 2022, the SECURE 2.0 Act added even more ways to withdraw money penalty-free.

Here are the main exceptions in place before the SECURE 2.0 Act.

Main Exceptions

No penalty will ever be due on early distributions from your 401(k) or other qualified plans if you leave your job the year you turn 55 or later. But this exception does not apply to IRAs (traditional, Roth, SEP, or SIMPLE IRAs).

Here’s a major exception relatively few people take advantage of: You can withdraw funds penalty-free from your IRA before age 59 1/2 if you take substantially equal periodic payments for at least five years or until you turn age 59 1/2. You calculate this under the assumption that you will withdraw your entire retirement plan either throughout your life or throughout the lives of you and your beneficiary.

There are various ways to calculate your withdrawals. It can get complicated. Also, for withdrawals by employees from qualified plans other than IRAs, this exception applies only if an employee separates from service.


You may withdraw any amount penalty-free if you become disabled before age 59 1/2.

The law allows penalty-free withdrawals to pay for medical expenses or medical insurance, but only to the extent such costs exceed 7.5 percent of your adjusted gross income.

You can withdraw penalty-free up to $5,000 to pay for birth or adoption expenses.

Additional Retirement Account Early Withdrawal Penalties Exceptions

You can also withdraw your money penalty-free from your IRA (traditional, Roth, SEP, and SIMPLE IRAs) for the following reasons:

  • To pay for higher education expenses
  • To pay for medical insurance if you become unemployed
  • To purchase or build a first home for yourself or certain family members—subject to a $10,000 lifetime limit

If you have any questions or need assistance, please contact us.

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