Early Withdrawal Penalty
Also called: 10% penalty, early distribution penalty
The early withdrawal penalty is an extra 10% tax on retirement account distributions taken before age 59½, on top of ordinary income tax. Exceptions exist and are worth knowing: disability, substantial medical costs, a first home from an IRA, substantially equal periodic payments, and separation from service at 55 or later for a workplace plan. Cashing out a 401(k) when changing jobs is the most common and most expensive way to trigger it.