People who are younger than 59 1/2 years old are usually subjected to a 10 percent penalty if they make an early withdrawal, as stated by Fidelity. Another cost of cashing out early is a large tax bill. Most cases of premature withdrawals have been noted to occur when people are changing jobs.
Early withdrawals may be an effective solution to short-term financial issues, but they can have heavy consequences on an individual's savings. Younger investors tend to make more early withdrawals than older investors, which gives them a hard time to replace the savings, as stated by Fidelity. Fidelity advises investors to always stay on old plans and enjoy the tax-advantage benefits they provide.