Early Withdrawal

AAA

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).

INVESTOPEDIA EXPLAINS '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. Redemption

    The return of an investor's principal in a fixed income security, ...
  3. Guaranteed Investment Contract ...

    Insurance contracts that guarantee the owner principal repayment ...
  4. Individual Retirement Account - ...

    An investing tool used by individuals to earn and earmark funds ...
  5. Maturity Date

    The date on which the principal amount of a note, draft, acceptance ...
  6. Registered Retirement Savings Plan ...

    A legal trust registered with the Canada Revenue Agency and used ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. Should I purchase a master limited partnership (MLP) in my retirement account?

    Most investors should not purchase units in a master limited partnership, or MLP, in their retirement accounts. MLPs offer ... Read Full Answer >>
  5. What are the tax implications of owning a master limited partnership (MLP)?

    There are significant tax benefits to owning units in a master limited partnership (MLP), although most investors do not ... Read Full Answer >>
  6. How should I invest the money I keep on my IRA?

    For individuals who are just starting to save, certificates of deposit can be a good place to start, but the interest rates ... Read Full Answer >>
Related Articles
  1. 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.
  2. Budgeting

    8 Reasons To Never Borrow From Your 401(k)

    Find out why dipping into your future savings can have serious consequences.
  3. 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.
  4. Professionals

    Why Some Advisors are Shy to Convert Roth IRAs

    Potential upcoming changes from the Obama Administration could hit rollovers from traditional to Roth IRAs, and that has advisors reluctant to convert.
  5. Professionals

    How to Fund Retirement with Insurance

    So you've contributed the max to all available retirement vehicles...now what? Consider a permanent life insurance policy (and its fee structure).
  6. Personal Finance

    Should You Track The Cost Of Retirement Income?

    Today, workers face a challenge when saving for retirement, because retirement income is getting more expensive, and the savings are not keeping up.
  7. Retirement

    How Much Money Do You Need To Retire In Hawaii?

    The Aloha State remains an idyllic place to retire, but at what cost? From rent to cereal to gasoline, we look at the hidden costs of living in paradise.
  8. Mutual Funds & ETFs

    This Gold ETF is Fine for Traders, Not Investors

    A look under the hood of the Direxion Daily Gold Miners Bull 3X ETF.
  9. Retirement

    IUL Insurance: An Alternative Retirement Plan?

    Indexed universal life insurance is the rise. But critics argue that wisely allocated IRA and 401(k) funds will normally offer better returns.
  10. Personal Finance

    A Guide to Financial Education for Doctors

    Doctors need to choose the educational option which best fits his or her time, schedule and learning preference. Here's a guide.

You May Also Like

Hot Definitions
  1. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  2. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  3. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  4. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  5. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center