When can you first make penalty-free withdrawals from a traditional IRA or 401(k)?
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Explanation
The IRS allows penalty-free withdrawals from traditional IRAs and 401(k)s starting at age 59½. Withdrawing before this age generally triggers a 10% early withdrawal penalty on top of ordinary income taxes, with a few exceptions such as disability or substantially equal periodic payments.
Understanding the difference between a Traditional IRA and Roth IRA can save you thousands in taxes depending on your current income and expected retirement tax bracket.