Save time with our cheat sheets, fact sheets, checklists & books!

February 20, 2009

Early Withdrawal

Your Guide

Print

Definition

Withdrawal that occurs from a certificate of deposit (CD)  before the maturity date.

An early withdrawal penalty is usually applied to CDs from which early withdrawals are made .

The early withdrawal penalty is often waived for IRAs, if the owner is either at least age 59 ½ when the withdrawal occurs or of RMD age

Referring Cite

Regulation D, 12 C.F.R. Sec. 204.2(c)(1);  12 C.F.R. Sec. 563.3-1(a)  ; 51 Fed. Reg. 10804

Additional Helpful Information

  • The early withdrawal penalty on an IRA CD is not rollover eligible. For instance, if the CD balance is $1,000, and the early withdraw penalty is $50, only $950 is rollover eligible.
  • The early withdrawal penalty is not treated as a distribution.  Therefore it is not reported on IRS Form 1099-R.

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

More

Keep Learning

What is the 5-Year Rule for beneficiaries?

Definition For beneficiaries who inherit retirement accounts,  a common question asked is “What is the 5-Year Rule for beneficiaries?” The beneficiary five-year rule is the

Be among the first to know when

IRA Rules
Change