Early Withdrawal

Early withdrawal refers to the removal of funds from certain tax-advantaged or fixed-term investment accounts—such as IRAs, 401(k)s, annuities, or CDs—before a specified allowed age or maturity date, typically before age 59½ for retirement accounts.​

Such withdrawals often result in penalties (usually a 10% tax for retirement accounts), immediate tax liability, and loss of future compounding. Exceptions are granted for specific situations, like disability or certain home purchases, but the majority of early withdrawals carry financial consequences and may adversely affect long-term savings outcomes.