Ways to Avoid the Penalty on Early Retirement Withdrawals

Sometimes you just can’t avoid dipping into a retirement fund, but you might be able to qualify for an exception to the 10% tax penalty.

A blue sign with the word penalty written in purple sits in front of several stacks of coins.
(Image credit: Getty Images)

Pulling money from your pre-tax retirement accounts before age 59½ should be done only as a last resort, since it can end up triggering both a 10% penalty as well as ordinary income tax. A far better solution is to use money from non-retirement accounts, such as joint accounts, single accounts or most trust accounts, where there will be no penalty on early retirement withdrawal and often little or far less tax.

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Mike Piershale, ChFC
President, Piershale Financial Group
Mike Piershale, ChFC, is president of Piershale Financial Group in Barrington, Illinois. He works directly with clients on retirement and estate planning, portfolio management and insurance needs.