Early Withdrawal

DEFINITION of 'Early Withdrawal'

The removal of funds from a fixed-term investment before the maturity date, or the removal of funds from a tax-deferred investment account or retirement savings account, such as an IRA or 401(k) before a prescribed time. Early withdrawal could be anything earlier than the account owner's attainment of a prescribed minimum age requirement, or the maturity of a fixed-term investment, such as a certificate of deposit (CD).

BREAKING DOWN 'Early Withdrawal'

When an early withdrawal is made, the investor usually incurs an early withdrawal fee, which acts as a deterrent to frequent withdrawals before the end of the early withdrawal period. As such, an investor would usually only opt for early withdrawals if there were pressing financial concerns that warranted it, or if he or she had a markedly better use for the funds.

RELATED TERMS
  1. Withdrawal Penalty

    Refers to any penalty incurred by an individual for early withdrawal ...
  2. Guaranteed Investment Contract ...

    Insurance contracts that guarantee the owner principal repayment ...
  3. Redemption

    The return of an investor's principal in a fixed income security, ...
  4. Registered Retirement Savings Plan ...

    A legal trust registered with the Canada Revenue Agency and used ...
  5. Maturity Date

    The date on which the principal amount of a note, draft, acceptance ...
  6. Individual Retirement Account - ...

    An investing tool used by individuals to earn and earmark funds ...
Related Articles
  1. Retirement

    SEP IRA Limits in 2016

    Discover the SEP IRA limits for 2016. Included is a summary, plans that would be ideal candidates for SEP IRAs, and contribution and distribution rules.
  2. Taxes

    Avoiding IRS Penalties On Your IRA Assets

    The best way to avoid additional charges and taxes is to know which transactions have expensive consequences.
  3. Budgeting

    8 Reasons To Never Borrow From Your 401(k)

    Find out why dipping into your future savings can have serious consequences.
  4. Retirement

    Traditional IRAs Tutorial

    This comprehensive guide goes through what a Traditional IRA is and how to set one up, contribute to it and withdraw from it.
  5. Savings

    What Your Credit Score Means for Your Love Life

    Wondering if your significant other wants to commit and is reliable? The Fed might have the answer.
  6. Your Clients

    Tips for Making Your Nest Egg Last Longer

    If you’re trying to figure out how to make your hard-earned nest egg last, there’s one piece of advice that stands above the rest.
  7. Investing

    3 Healthy Financial Habits for 2016

    ”Winning” investors don't just set it and forget it. They consistently take steps to adapt their investment plan in the face of changing markets.
  8. Retirement

    Early Out: A Realistic Plan to Retire Younger

    If you want to retire ahead of schedule, it'll take some extra planning.
  9. Mutual Funds & ETFs

    Which Fund Share Class is Best for Retirement?

    Mutual funds are a popular investment for retirement. Here's how to choose the best share class when investing in them.
  10. Retirement

    6 Robo-Advisors That Require Little to Start

    There are many well-regarded robo-advisor options that come with minimum investment amounts. Here are snapshots of a handful of them.
RELATED FAQS
  1. Can my IRA be used for college tuition?

    You can use your IRA to pay for college tuition even before you reach retirement age. In fact, your retirement savings can ... Read Full Answer >>
  2. How do you rollover/transfer a 401(k) to another 401(k)?

    When an employee leaves a job due to retirement or termination, the question about what to do with the accumulated balance ... Read Full Answer >>
  3. How are benefits from a provident fund taxed?

    Not all provident fund benefits are treated equally, even in the same country. Thailand, for instance, has three separate ... Read Full Answer >>
  4. What are the differences between a Simple IRA and a Traditional IRA?

    A traditional IRA is set up by an individual on his or her own behalf to save for retirement, whereas a SIMPLE IRA is set ... Read Full Answer >>
  5. Do I still have to pay penalties and taxes on money that I don't roll over from a ...

    It depends. Let's address the two penalties that will apply - the 10% early-withdrawal penalty and the 20% federal withholding ... Read Full Answer >>
  6. What are the penalties for withdrawing from my Traditional IRA less than a year after ...

    Withdrawals from your Traditional IRA will be treated as ordinary income, and if you are under age 59.5 when the distribution ... Read Full Answer >>
Hot Definitions
  1. Short Selling

    Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is ...
  2. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  3. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  4. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  5. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  6. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center