Which withdrawal would be subject to the 10% early withdrawal penalty?

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Study for the Louisiana Series 103 – Life, Health, and Accident or Sickness Insurance Exam. Familiarize yourself with key concepts through engaging questions and explanations. Prepare effectively for your exam!

Multiple Choice

Which withdrawal would be subject to the 10% early withdrawal penalty?

Explanation:
The main idea is that a 10% penalty applies to early distributions from retirement accounts taken before age 59½, but there are specific exceptions that waive the penalty. Medical expenses, qualified higher education expenses, and disability are such exceptions. A withdrawal to buy stock doesn’t meet any of those exceptions, so it would incur the 10% early withdrawal penalty. The other types listed are penalties-free because they fall under recognized exceptions.

The main idea is that a 10% penalty applies to early distributions from retirement accounts taken before age 59½, but there are specific exceptions that waive the penalty. Medical expenses, qualified higher education expenses, and disability are such exceptions. A withdrawal to buy stock doesn’t meet any of those exceptions, so it would incur the 10% early withdrawal penalty. The other types listed are penalties-free because they fall under recognized exceptions.

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