Withdrawing money before retirement
Retirement accounts are set up to be used for just that—retirement. Therefore, traditional retirement accounts come with a penalty attached for early withdrawal. If you withdraw the money before age 59 1/2, you pay a penalty. This penalty is equal to 10 percent of the amount you withdraw.
The 10 percent penalty applies to traditional accounts only if the money is withdrawn and never returned. If you can repay the money to your account, you may have other options. Some retirement accounts allow you to repay the money within a certain time period with no penalty. Check with your financial institution to determine their policies.
Unlike traditional retirement accounts, Roth IRAs don’t have a penalty for early withdrawal. You can take out the money you put into a Roth IRA at any time without paying a penalty or taxes. You can’t withdraw the interest earned, however, or you likely will pay a penalty.
When considering using money in your retirement account, think carefully. This is the money you’ll use to support yourself when you can no longer work. Weigh your priorities, keeping your “future self” in mind. You may likely need that money in the future more than you need it now!