When Can You Withdraw Money from Your IRA Without Penalties?

Did you know that withdrawing money from your traditional IRA before turning age 59 ½ is a big blunder?  Not only do you have to pay tax on the withdrawal, but you also must pay a 10% penalty on the amount withdrawn.  Ouch!

However, there are some ways to withdraw from your IRA early without triggering the 10% penalty:

  1. Medical Expenses – if you have high unreimbursed medical expenses, you can withdraw a limited amount without penalty.
  2. Medical Insurance Premiums – you can withdraw an amount to pay for medical insurance premiums if you have lost a job and receive unemployment compensation.
  3. Higher Education Expenses – you can withdraw from your IRA if you are using the money to help pay for college and higher education experiences.
  4. Disability – if you are “totally and permanently disabled,” you can take distributions from your IRA without penalty.
  5. Death – if you die, your beneficiaries can take distributions from your IRA without penalty.
  6. Divorce – IRS private rulings have allowed divorcing spouses to divide an IRA into two separate IRAs.
  7. First Time Home Purchase – you are allowed to withdraw $10,000 to pay for costs associated with a first-time home purchase.
  8. Qualified Reservist – if you served after September 11, 2001 for at least 6 months, you can make a withdrawal from your IRA during your active duty period.
  9. Roth IRA Conversion – when you convert your traditional IRA to a Roth IRA, there is no 10% penalty.
  10. Rollover – you can have access to your funds without penalty as long as your IRA rollover is completed within 60 days.
  11. Investment Advisor Fees – you can authorize your custodian to pay your financial advisor or investment manager from your IRA funds for managing your IRA.
  12. Series of Substantially Equal Periodic Payments – you can withdraw from your IRA under age 59 ½ if you take a “Series of Substantially Equal Periodic Payments” where you liquidate the IRA and take equal payment over your life expectancy.  

Written by Legacy Planning Law Group

Legacy Planning Law Group is dedicated to working with individuals and families to help protect the assets they have built throughout their life, and make everything simpler for families who have lost a loved one. We help thoughtful people achieve the peace of mind that comes with planning their personal legacy and passing on family harmony.