Life · Chapter 11 · Rollovers & Distributions
IRA Early Withdrawal: 10% Penalty & Exceptions
Definition
Traditional IRA distributions before 59½ incur income tax + 10% penalty — waived for: death or disability · unreimbursed medical expenses above 7.5% of AGI · higher education · first-time home purchase (up to $10,000 lifetime) · health insurance premiums while unemployed · substantially equal periodic payments (SEPP) · IRS levy · correcting an excess contribution.
Exam tip
Distributions are taxed like annuities: nondeductible contributions return tax-free (cost basis); deductible contributions + earnings are taxable. ⚠️ §72(t) is the 10% penalty on qualified plans and IRAs; §72(q) is the identical-looking 10% penalty on non-qualified annuities — course material blurs them, the exam does not. Also: the age-55 separation-from-service exception is an employer-plan exception only; it does NOT apply to IRAs.
Easy to confuse with
These are what this term gets tested against — if you can't tell them apart cold, drill the contrast.
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