What are the exceptions to the 10% early withdrawal penalty?
The IRS allows penalty-free early withdrawals in specific situations. The penalty is waived, but ordinary income tax may still apply depending on your account type. Common exceptions include: first-time home purchase (up to $10,000 lifetime), unreimbursed medical expenses exceeding 7.5% of adjusted gross income, total and permanent disability, death or beneficiary distributions, qualified higher education expenses, and substantially equal periodic payments (SEPP/72(t)). For SIMPLE IRAs, the penalty jumps to 25% if you withdraw within the first two years of participation a detail many account holders miss.
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