Before age 59.5, what is the penalty on the taxable portion of withdrawals?

• A. 5%
• B. 10%
• C. 15%
• D. 0%

Answer: (B)

Taking money out of a traditional IRA or other qualified retirement plan before age 59½ triggers a 10% early withdrawal penalty on the portion of the distribution that is includible in taxable income. This penalty is in addition to the ordinary income tax due on the distribution. Exceptions exist (disability, death, certain medical expenses, first-time homebuyer under certain limits, substantially equal periodic payments, etc.), but without an applicable exception the penalty is 10%. So the taxable portion of pre‑59½ withdrawals is charged a 10% penalty.