The Risks of Withdrawing Savings Early

Proceed with caution before deciding to withdraw money early from your retirement savings account.

No matter how much planning and preparation you've done over the years, it's safe to say the effects of a global pandemic and months-long stay-at-home orders were never factored into most people's retirement savings calculations. So, how do you balance protecting your long-term retirement savings with covering your basic needs today?

During this volatile time, many individuals are facing tough financial decisions to get the immediate cash they need to cover rent, mortgage payments, utilities and medical bills. One decision you may be weighing is the value that an early withdrawal from your retirement savings account can provide, if permitted by your plan.

While each person's financial needs and individual situation differ, as you weigh the pros and cons of an early withdrawal, it is critical to review all other available options—including using emergency savings or taking a personal loan—before moving forward with an early withdrawal, even in the most challenging financial circumstances.

Despite the immediate cash an early withdrawal provides, your financial health may be negatively affected in the long term. For example, by withdrawing funds, you miss out on the opportunity for that money to grow tax-deferred in your retirement savings plan as the market recovers and generates potential gains.1

Furthermore, even though recent federal legislation in response to COVID-19 (known as the CARES Act) waives the 10 percent early withdrawal tax penalty during 2020, taking an early withdrawal now would still mean you have to pay income taxes on the amount you take out.2,3

To learn more about how you can plan for a financially secure future, please contact your local Mutual of America representative.


The performance of the Separate Account investment options is not guaranteed, and any assets allocated to them may decrease or increase in value.


Generally, withdrawals are subject to income tax at your ordinary income tax rate at the time of withdrawal, and if made prior to age 59½, a 10% federal tax penalty.


If permitted by your plan, and you are considered a qualified individual, you can take up to $100,000 as an in-service distribution without penalty, regardless of your age. A "qualified individual" is an individual who (a) has been diagnosed with COVID-19, or (b) has a spouse or dependent who was diagnosed with the virus, or (c) experienced various adverse financial consequences related to the pandemic as set forth in the Act, and any additional factors as may be determined by the Secretary of the Treasury. If you take a distribution, you may spread the income tax ratably over three years and may repay the distribution to the plan within three years. If you are eligible for a withdrawal, you still must pay ordinary income tax, but the 10% penalty is waived. Please check with your tax adviser or attorney for the latest information and options available to you with respect to your specific circumstances.


You should consider the investment objectives, risks, and charges and expenses of the variable annuity contract and the underlying investment funds carefully before investing. This and other information is contained in the contract prospectus or brochure and underlying funds prospectuses and summary prospectuses, which can be obtained by calling 1.800.468.3785 or visiting Read them carefully before investing.

Mutual of America's group and individual retirement products are variable annuity contracts and are suitable for long-term investing, particularly for retirement savings. The value of a variable annuity contract will fluctuate depending on the performance of the Separate Account investment options you choose. Upon redemption, you could receive more or less than the principal amount invested. A variable annuity contract provides no additional tax-deferred treatment of benefits beyond the treatment provided to any qualified retirement plan or IRA by applicable tax law. You should consider a variable annuity contract's other features before making a decision.

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