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When, how, and what you can take out — without getting hit.
Common Mistake
For most retirement accounts, withdrawing before age 59½ triggers a 10% early withdrawal penalty on top of regular income taxes. On a $10,000 withdrawal in the 22% tax bracket, you'd lose $3,200 — 32% — to taxes and penalties combined.
Before 59½
Taxes + 10% penalty before 59½
Normal Withdrawals
Withdraw anytime, taxed as ordinary income
RMDs
Yes — starting at age 73
Penalty Exceptions
Before 59½
Taxes + 10% penalty before 59½
Normal Withdrawals
Withdraw anytime, taxed as ordinary income
RMDs
Yes — starting at age 73
Penalty Exceptions
Before 59½
Contributions: anytime penalty-free. Earnings: taxes + 10% before 59½
Normal Withdrawals
Completely tax-free and penalty-free
RMDs
No RMDs during your lifetime ✓
Penalty Exceptions
Roth IRA withdrawals follow a specific order set by the IRS — and it matters because different layers are taxed (and penalized) differently.
Your contributions
Always available — no taxes, no penalty, anytime
Converted amounts
Tax-free, but 10% penalty if withdrawn within 5 years of conversion (unless 59½+)
Earnings / Growth
Tax-free and penalty-free only if account is 5+ years old AND you're 59½+
Starting at age 73, the IRS requires you to withdraw a minimum amount from Traditional IRAs and 401(k)s each year. The amount is calculated by dividing your prior year-end balance by an IRS life expectancy factor.
| Age | IRS Factor | $500K Balance | RMD Amount |
|---|---|---|---|
| 73 | 26.5 | $500,000 | $18,868 |
| 75 | 24.6 | $500,000 | $20,325 |
| 80 | 20.2 | $500,000 | $24,752 |
| 85 | 16.0 | $500,000 | $31,250 |
| 90 | 12.2 | $500,000 | $40,984 |
* RMD = Prior year-end balance ÷ IRS life expectancy factor. Roth IRAs have no RMDs during your lifetime.
If you miss an RMD, the IRS charges a 25% excise tax on the amount you should have withdrawn. This drops to 10% if corrected within 2 years. Set calendar reminders or work with your brokerage — many will automatically calculate and send your RMD.
Key Insight
Converting Traditional IRA or 401(k) money to a Roth IRA in your 60s (before RMDs kick in) reduces the balance subject to RMDs. You pay taxes now, but your Roth grows tax-free and has no RMDs — giving you more control in retirement.
Taking money out of a retirement account before age 59½. Generally triggers a 10% penalty on top of ordinary income taxes — with limited exceptions.
The IRS-mandated minimum amount you must withdraw from Traditional IRAs and 401(k)s starting at age 73, calculated based on your account balance and life expectancy.
A Roth IRA withdrawal that is completely tax-free and penalty-free — requires the account to be at least 5 years old and the owner to be 59½ or older.
A series of substantially equal periodic payments (SEPP) that allows penalty-free early withdrawals if taken in equal amounts over at least 5 years or until age 59½.
Quick Summary
You now understand contribution limits, employer match, and withdrawal rules. Time to put it all together with a full retirement plan.
Start Module 3: Retirement Planning →