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A withdrawal from a traditional IRA, 401(k), 403(b) or 401(a) made before the owner reaches 59½ costs a 10% additional tax on top of income tax. A 457(b), traditional or Roth, is treated as a government employer’s plan and never carries it. CoastMath charges it on every such withdrawal except payments from an active 72(t) series and withdrawals from inherited accounts. It grosses up the withdrawal so the money left after that tax still covers the shortfall.
Roth withdrawals come out in the legal order: regular contributions first, then conversions from the oldest year, then earnings. Only the conversions and earnings can cost anything, and only until the relevant five-year clocks and 59½ are met.
Additional tax=Withdrawal×10%×share of the year before 59½
CoastMath assumes withdrawals are spread evenly over the year, so only the share of the year before 59½ is charged.
| Traditional IRA withdrawalGrossed up for the additional tax, then for the income tax it creates | $22,987.50 | |
|---|---|---|
| − | Additional tax (10%) | $2,298.75 |
| − | Income tax($22,987.50 − $16,100 standard deduction) × 10% | $688.75 |
| = | Left to spend | $20,000.00 |
You reach 59½ at the start of the month six months after your birth month. Without a Plan detailsBirth month, the whole year you turn 59 counts as before 59½ and the year you turn 60 counts as after. With a birth month, the charge is split between those two years:
| Birth month | Year you turn 59 | Year you turn 60 |
|---|---|---|
| Not entered | 10.00% | 0.00% |
| January | 5.00% | 0.00% |
| February | 5.83% | 0.00% |
| March | 6.67% | 0.00% |
| April | 7.50% | 0.00% |
| May | 8.33% | 0.00% |
| June | 9.17% | 0.00% |
| July | 10.00% | 0.00% |
| August | 10.00% | 0.83% |
| September | 10.00% | 1.67% |
| October | 10.00% | 2.50% |
| November | 10.00% | 3.33% |
| December | 10.00% | 4.17% |
Each rate is 10% × the months before 59½ ÷ 12. The owner’s age decides, so a partner’s account follows the partner’s birth year and month.
HSA money spent on anything other than the year’s modeled medical costs works the same way with a 20% additional tax that ends at 65.
| Exception | In CoastMath |
|---|---|
| Owner has reached 59½ | Applied, prorated by month as above |
| Substantially equal periodic payments (72(t)) | Applied to the series account’s scheduled payments |
| Inherited accounts | Applied: withdrawals from an inherited IRA or 401(k) carry no additional tax |
| Leaving an employer in or after the year you turn 55 | Applied to that employer’s 401(k), 403(b) or 401(a) plan when you enter the year you left; never to IRAs or other employers’ plans |
| Leaving an employer in or after the year you turn 50 (public safety workers) | Not modeled |
| Disability, terminal illness, medical costs above 7.5% of income, first home, education, birth or adoption, emergency, disaster and similar exceptions | Not modeled |
To use the exception, open the 401(k), 403(b) or 401(a) account and fill in Year you left this plan’s employer under Distribution rules. CoastMath treats that as leaving on January 1 of the year. The additional tax is waived on that plan’s withdrawals from the first year in which the owner is 55 by the end of the calendar year and the separation has happened. A year earlier than that, or a blank year, keeps the charge. It follows the account owner’s age, so a partner’s plan uses the partner’s birth year. Withdrawals stay in the same preview and in the projection. Leaving blank is a choice you make; CoastMath does not assume you separated.
All of one person’s own Roth IRAs are treated as one pool for the year. Withdrawals take, in order:
- Regular contributions. Never taxed, never charged the additional tax.
- Conversions, oldest year first, and within a year the previously taxed part before any nontaxable part. No income tax. Before 59½, the taxed part of a conversion less than five years old is charged 10%.
- Earnings. Untaxed once the withdrawal is qualified. Otherwise they are ordinary income, plus 10% before 59½.
A withdrawal is qualified from the fifth calendar year after your first Roth contribution or conversion, once you are 59½ for most of the year. A conversion made in 2023 stops being charged in 2028. An inherited Roth needs only the five years.
| Regular contributionsUntaxed | $40,000 | |
|---|---|---|
| + | 2023 conversion, all previously taxedLess than five years old: 10% additional tax | $30,000 |
| + | EarningsNot qualified: income, plus 10% additional tax | $14,444.44 |
| = | Roth withdrawal | $84,444.44 |
| − | Additional tax: 10% × ($30,000 + $14,444.44) | $4,444.44 |
| − | Income tax on the earningsBelow the $16,100 standard deduction | $0 |
| = | Left to spend | $80,000 |
First Roth contribution in 2015. The rest of the account, $15,555.56, is earnings.
Year
The five-year clock from 2015 is met, but earnings stay unqualified until the owner is 59½ for most of a year. With no birth month entered, that is the year they turn 60.
Show data
| Period | From | Until |
|---|---|---|
| Five-year clock from the first contribution | 2015 | 2020 |
| 2023 conversion charged before 59½ | 2023 | 2028 |
| Before 59½ (born 1974) | 2015 | 2034 |
A Roth 401(k) is its own pool with its own five-year clock. Until it is qualified, each withdrawal is part contributions and part earnings in proportion to the account’s balance, instead of contributions first.
The additional tax is part of the year’s taxes. Tax toolsAnnual tax breakdown lists it as Early withdrawal penalty, and the year details on Overview show Early withdrawal penalties. Where each dollar came from is covered in How shortfalls are funded.