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Penalty-free distributions

Money taken from a retirement account before age 59½ that is not subject to the usual extra 10% tax for early withdrawal.

Internal Revenue Code of 1986

The main body of federal tax law in the United States, which governs how taxes are collected and what rules apply to income, deductions, and withdrawals.

Retirement plans

Savings accounts specifically designed for retirement, such as 401(k)s, IRAs, and other qualified plans, which offer tax benefits on contributions or earnings.

Unemployment compensation

Payments made by federal or state governments to eligible individuals who are temporarily out of work.

Taxable year

The annual accounting period for keeping records and reporting income and expenses, typically January 1st to December 31st for most individual taxpayers.

Early distribution penalty

An additional 10% tax imposed by the IRS on withdrawals from most retirement accounts made before the account holder reaches age 59½, unless an exception applies.