What is a common consequence of taking money out of a retirement account before the age of 59½?

Taking money out of a retirement account before the age of 59½ typically incurs an early withdrawal penalty. This penalty is designed to discourage individuals from dipping into their retirement savings prematurely, as these accounts are intended for long-term financial security. Generally, if you withdraw funds from such accounts, you might face a 10% penalty on the amount withdrawn, in addition to any applicable income taxes.

While it's true that the account balance will decrease because of the withdrawal, the specific focus of this question is on the typical penalties and consequences associated with early withdrawals. Other options, like higher contribution limits or increased investment returns, do not directly arise as consequences of withdrawing funds early. Thus, the early withdrawal penalty is a key consideration for anyone thinking about accessing retirement funds before reaching the designated age.