Compared to other saving options, savings accounts have the benefit of being highly liquid. That is, the money usually can be accessed at anytime. There are circumstances, however, when withdrawals cannot be made without incurring a penalty. It depends on the savings account status, how the money is accessed, and whether it's held in a tax-sheltered account.
It's important to consider how money will be used once put in a savings account. After all, they are for just that, saving money. If you are unsure of how often you will use your money in savings, consider keeping it in a checking account instead. You may not earn interest, but you won't be penalized for withdrawals. Similarly, only put money into a tax-deferred account if you are certain you will not have to make withdrawals from the account until you retire.
Tax Deferred Account
In an account like an IRA, the money cannot be withdrawn without penalty until the account holder is 59 years old, otherwise there is a 10 percent penalty. Exceptions exist for financial hardship. Depending on how the account is set up, you may have to pay these penalties at the time of withdrawal or when your taxes are filed.
Sometimes a bank has recourse to freeze a savings account, which will prohibit withdrawals from being made. Reasons for a frozen account include fraudulent activity or if a court lien has been placed against the account. Under these circumstances money may still be transferred from the account, but special authorization will typically have to be given by a bank employee.
While you can technically still withdraw the money, money taken too often from a savings account can still cost you. Many banks only allow a certain amount of withdrawals in a statement period, after which a fee is charged for additional withdrawals. For example, Bank of America has a withdrawal maximum of three times per month, after which there is a $3 fee. Checking accounts do not have withdrawal limits, and if money in a savings account is frequently used it should be held in a checking account.
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