What is the penalty for early withdrawals from a traditional IRA?

The penalty for early withdrawals from a traditional IRA is typically a 10% penalty on the amount withdrawn. This penalty applies if you take distributions from your IRA before reaching the age of 59½, which is the age at which you can begin withdrawing funds without incurring this additional charge.

The purpose of the penalty is to discourage individuals from accessing retirement funds prematurely, ensuring that these funds serve their intended purpose of supporting individuals during retirement. This 10% early withdrawal penalty can be applied in addition to regular income taxes owed on the distribution.

There are exceptions where early withdrawals may not incur this penalty, such as in cases of disability, significant medical expenses, or first-time home purchases, among others, but in general circumstances, the standard penalty is 10%.