A Traditional (pre-tax) IRA owner may withdraw funds at will. The amount withdrawn is subject to ordinary income tax. If the owner is younger than 59.5, an additional tax, equal to 10 percent of the amount withdrawn, is also levied.
Example: Bob, age 50, withdraws $20,000 from his IRA. His ordinary income tax will be $3,000. He also must pay a penalty tax of $2,000. His total tax is $5,000. So he nets $15,000 on his pre-age 59.5 withdrawal of $20,000. This is not the way funds, dedicated for retirement, should be managed.
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