What penalty does Joe incur for taking an early withdrawal from his IRA at age 57?

When an individual takes an early withdrawal from a traditional IRA before reaching the age of 59½, they typically incur a 10% federal penalty on the amount withdrawn. This penalty is designed to discourage individuals from prematurely accessing their retirement savings.

In Joe's case, since he is 57 years old and makes an early withdrawal from his IRA, he falls into this category and is subject to the 10% penalty. There are specific exceptions to this rule for certain circumstances, such as first-time home purchases, higher education expenses, or disability, but these exceptions must be clearly met to avoid the penalty. As such, unless Joe qualifies for one of these exceptions, the correct consequence of his action is indeed the 10% federal penalty on his early withdrawal.