# Early Withdrawal Penalty

*Retirement & Benefits — Finicade finance glossary*

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.

**Also known as:** 10% penalty, early distribution penalty

**Related terms:** [401(k)](https://finicade.com/glossary/401k), [Traditional IRA](https://finicade.com/glossary/traditional-ira), [Rule of 55](https://finicade.com/glossary/rule-of-55), [457 Plan](https://finicade.com/glossary/457-plan), [Roth IRA](https://finicade.com/glossary/roth-ira)

Source: https://finicade.com/glossary/early-withdrawal-penalty