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Premature Distribution

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Dictionary Says

Definition of 'Premature Distribution'

Any distribution taken from an IRA, qualified plan or tax-deferred annuity that is paid to a beneficiary that is under age 59.5. Premature distributions are subject to a 10% early-withdrawal penalty by the IRS as a means of discouraging savers from spending their retirement assets prematurely.

Investopedia Says

Investopedia explains 'Premature Distribution'

There are several instances in which the premature-distribution penalty rules are waived, such as for first-time homebuyers, education expenses, medical expenses and Rule 72(t), which states that a taxpayer can take IRA withdrawals before they are 59.5 as long as they take at least five substantially equal periodic payments (SEPPs).

Articles Of Interest

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    9 Penalty-Free IRA Withdrawals

    If you need to take early distributions, find out which exemptions allow you to avoid expensive consequences.

  2. Tax Treatment Of Roth IRA Distributions

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  3. Borrowing From Your Retirement Plan

    Left with no alternative but to take money out from your retirement savings? Here are some guidelines.

  4. Tough Times: Should You Dip Into Your Qualified Plan?

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  5. I stopped distributions from my retirement account while under Rule 72(t). Will this have any effect on future distributions that I do take? Am I subject to the 10% penalty?

    If an individual modifies a substantially equal periodic payment (SEPP), including discontinuing the SEPP before the end of the applicable SEPP period or increasing or decreasing the required ...

  6. Is my non-qualified Roth IRA distribution subject to taxes or early distribution penalties?

    The ordering rules must be applied to determine whether the distribution is subject to income taxes and/or the early distribution penalty. Under these ordering rules, distributions are taken ...

  7. Substantially Equal Periodic Payment (SEPP): Learn The Rules

    Taxpayers often make costly mistakes with SEPP programs because there is little guidance on what can be done in certain situations.

  8. Business Owners: Rules For Qualified Retirement Plans

    Business owners need to take note of how they handle qualified-plan distributions to former employees.

  9. I do not want to totally get out of my retirement 401(k), but I want to take 72(t) distributions. What should I consider?

    The exact amount of the 72(t) distributions that you are eligible to take will be determined by your age and the IRS published interest rate for the month the calculation is done. Generally, ...

  10. What are the "certain requirements" that must be met for substantially equal periodic payments (SEPPs)? Is it taxed at 20%? Is there any downside to the SEPP?

    For substantially equal periodic payments (SEPPs), the distributions would occur from your IRA after you rollover the assets. (SEPPs are also allowed from qualified plans after the participant ...
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