Premature Distribution


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.

BREAKING DOWN '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).

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  1. I stopped distributions from my retirement account while under Rule 72(t). Will this ...

    If an individual modifies a substantially equal periodic payment (SEPP), including discontinuing the SEPP before the end ... Read Full Answer >>
  2. I am 52 years old and wish to make a withdrawal from my 401(k) plan. Is there any ...

    Most distributions from qualified retirement plans made to you before you reach the age of 59.5 are subject to an additional ... Read Full Answer >>
  3. What are the "certain requirements" that must be met for substantially equal periodic ...

    For substantially equal periodic payments (SEPPs), the distributions would occur from your IRA after you rollover the assets. ... Read Full Answer >>
  4. Is my non-qualified Roth IRA distribution subject to taxes or early distribution ...

    The ordering rules must be applied to determine whether the distribution is subject to income taxes and/or the early distribution ... Read Full Answer >>
  5. I do not want to totally get out of my retirement 401(k), but I want to take 72(t) ...

    The exact amount of the 72(t) distributions that you are eligible to take will be determined by your age and the IRS published ... Read Full Answer >>
  6. Can I borrow from an IRA without penalty?

    Technically speaking - yes. The 60-day rollover rule applies to all types of IRAs. This 60-day rollover rule allows you to ... Read Full Answer >>

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