Distributions from a retirement plan before age 59.5 are generally subject to a 10% penalty.

Starting 2024, there is exception for distributions from an employer plan used for emergency expenses, which are unforeseeable or immediate financial needs relating to personal or family emergency expenses. Only one distribution is permissible per year of up to $1,000, and a taxpayer has the option to repay the distribution within three years. No further emergency distributions are permissible during the three-year repayment period unless repayment occurs.