Experience and Benefits

10% Penalty on Distributions Prior to Age 59-1/2

To discourage premature distributions, Section 72(t) generally imposes a 10% excise tax on IRA withdrawals and plan distributions received prior to age 59‑1/2. This 10% penalty tax does not apply to distributions made:

  1. after your death,
  2. because of your total and permanent disability,
  3. pursuant to a Qualified Domestic Relations Order with respect to a qualified plan,
  4. in substantially equal periodic payments (not less frequently than annually) over your life or life expectancy, or the joint lives or joint life expectancies, of you and your designated beneficiary,
  5. after your separation from service after attainment of age 55 if the distribution is from a qualified plan,
  6. attributable to deductible medical expenses, i.e., expenses that exceed 7.5% of adjusted gross income (AGI) if the distribution is from a qualified plan, or
  7. distributions used by an unemployed person to pay health insurance
  8. withdrawals used to meet higher-education expenses (including tuition, fees, books, supplies, required equipment, room and board, and graduate courses) for academic periods beginning after 1997. This applies for the IRA owner, spouse, and any child or grandchild of either. The amount of higher education expenses is limited by tax-free scholarships and other tax-free assistance the student is receiving.
  9. withdrawals used for first-time home purchases, up to $10,000.

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