What is the tax consequence of withdrawing money from a traditional IRA before age 59½?

Withdrawing money from a traditional IRA before reaching the age of 59½ generally triggers a tax consequence in the form of a 10% early withdrawal penalty. This penalty is designed to discourage individuals from taking money out of their retirement savings before they reach a certain age, as these accounts are intended for long-term saving for retirement. In addition to this penalty, the amount withdrawn is also subject to regular income tax, as traditional IRA withdrawals are taxed as ordinary income.

The 10% early withdrawal penalty applies to most distributions taken from a traditional IRA prior to the age of 59½. There are some exceptions, such as for disability, certain higher education expenses, or first-time home purchases, but those are specific scenarios and do not apply broadly.

Therefore, because the primary consequence of withdrawing funds from a traditional IRA before the designated age is the imposition of the 10% penalty on the early withdrawal, this makes the choice regarding the penalty situation the correct response.