Calculate the cost of accessing your funds before maturity
Certificate of Deposit (CD)
Retirement (IRA/401k)
Results Summary
Total Penalty Amount:$0.00
Estimated Tax Liability:$0.00
Total Loss of Funds:$0.00
Net Amount Received:$0.00
Understanding Early Withdrawal Penalties
An early withdrawal penalty is a fee charged by financial institutions or the government when you take money out of a restricted account before the agreed-upon date or age. Whether it is a Certificate of Deposit (CD) or a retirement account like a 401(k), the costs can significantly impact your principal.
How CD Penalties Work
Banks typically calculate CD penalties based on a specific amount of interest earned. Common structures include:
90 Days of Interest: Common for short-term CDs (under 1 year).
180 to 360 Days of Interest: Standard for 2 to 5-year CDs.
Principal Reduction: If you haven't earned enough interest to cover the penalty, the bank will deduct the difference from your original deposit.
Retirement Account Penalties (401k/IRA)
Withdrawing from a traditional retirement account before age 59½ usually triggers two major costs:
IRS 10% Penalty: A flat federal excise tax for early distribution.
Income Tax: The withdrawal is treated as taxable income, meaning you owe taxes based on your current marginal tax bracket.
Example Calculation
Suppose you withdraw $10,000 from a 5-year CD with a 4% APY that has a 6-month interest penalty:
Annual Interest: $10,000 × 0.04 = $400
Monthly Interest: $400 / 12 = $33.33
Penalty (6 Months): $33.33 × 6 = $199.98
In this scenario, you would receive $9,800.02 back.
function toggleInputs() {
var type = document.getElementById('accountType').value;
var cdFields = document.getElementById('cdFields');
var retirementFields = document.getElementById('retirementFields');
var taxRow = document.getElementById('taxRow');
if (type === 'cd') {
cdFields.style.display = 'block';
retirementFields.style.display = 'none';
taxRow.style.display = 'none';
} else {
cdFields.style.display = 'none';
retirementFields.style.display = 'block';
taxRow.style.display = 'flex';
}
}
function calculatePenalty() {
var type = document.getElementById('accountType').value;
var amount = parseFloat(document.getElementById('withdrawalAmount').value);
if (isNaN(amount) || amount <= 0) {
alert('Please enter a valid withdrawal amount.');
return;
}
var penalty = 0;
var tax = 0;
var totalLoss = 0;
if (type === 'cd') {
var apy = parseFloat(document.getElementById('annualRate').value) / 100;
var months = parseFloat(document.getElementById('penaltyMonths').value);
if (isNaN(apy) || isNaN(months)) {
alert('Please enter interest rate and penalty duration.');
return;
}
// Calculation: (Amount * (APY/12)) * Months
penalty = (amount * (apy / 12)) * months;
} else {
var penaltyRate = parseFloat(document.getElementById('flatPenalty').value) / 100;
var incomeTaxRate = parseFloat(document.getElementById('taxRate').value) / 100;
if (isNaN(penaltyRate) || isNaN(incomeTaxRate)) {
alert('Please enter penalty and tax rates.');
return;
}
penalty = amount * penaltyRate;
tax = amount * incomeTaxRate;
}
totalLoss = penalty + tax;
var net = amount – totalLoss;
// Update UI
document.getElementById('penaltyResult').innerText = '$' + penalty.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('taxResult').innerText = '$' + tax.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('totalLoss').innerText = '$' + totalLoss.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('netAmount').innerText = '$' + net.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resultArea').style.display = 'block';
}