Early withdrawal penalties fall hardest on workers lacking other emergency funds

Evidence

When you put money into your retirement account, tax policy allows it to remain there, untaxed, until you retire, make an early withdrawal, or turn seventy-two. But if you take an early withdrawal (prior to turning fifty-nine and a half), the penalties are steep—not only is the withdrawal included in your taxable income, but the government also levies an additional 10 percent income tax penalty. The penalty is designed as a deterrent, to discourage withdrawals. But early retirement account withdrawals are generally a last resort. If employees could get the money elsewhere—through a loan or a gift from family, or from savings—they would not be withdrawing it from their retirement accounts. So it’s not surprising that black employees, who have fewer of these kinds of resources to draw on, are significantly more likely to take hardship withdrawals. — Dorothy A. Brown, The Whiteness of Wealth, 396

Categorization

• XREF: Connects to her core thesis about facial neutrality producing disparate racial impact; mechanism-specific, useful for the four-provisions argument.