Penalty tax

Definition:

A federal tax that can be applied if a plan holder does not meet certain requirements when making withdrawals from a tax-advantaged retirement plan (for instance, if the plan holder has not reached age 59-1/2). This penalty tax is owed in addition to any income taxes due.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

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Pension Benefit Guaranty Corporation (PBGC)

A federal agency that insures the vested benefits of pension plan participants (established in 1974 by the ERISA legislation).

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