Sentences with phrase «withdrawal at the normal rate»
If you find yourself in a tight financial situation and need to dip into your piggy bank before you hit that 59 1/2 milestone, you may have to pay dearly in the form of a 10 % income tax penalty (i.e., you'll pay income tax on the withdrawal at the normal rate, plus another 10 %).
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Further, the gains on these accounts are taxed as normal income — not at the lower capital gains rate — upon withdrawal.
You do need to be careful, however, that you understand when and how you are allowed to withdraw your earnings (the interest you earn on your contributions)-- before your retirement age, because if you're not careful you could be subject to a 10 % early withdrawal penalty by the IRS, and be taxed at your normal tax rate.
Contributions to a RRSP are generally tax deductible but withdrawals are taxed at your normal income tax rates.