Question: Can I make penalty-free IRA withdrawals?
Answer: The tax law generally makes you pay a 10% penalty if you take money out of an IRA before you reach age 59½. However, there are several ways to tap your IRA earlier without incurring the 10% penalty.
|Equal withdrawals. One way is to elect to take substantially equal withdrawals based on your life expectancy or the joint life expectancies of you and your designated beneficiary.|
|Home and education. You may also take money from your IRA to help cover certain expenses. For example, if you, your child, or grandchild is purchasing a home and the purchaser hasn’t owned a home within the last two years, you can withdraw, penalty-free, up to $10,000 to use towards this transaction. Likewise, if you, your spouse, child, or grandchild attends college or graduate school, you can take penalty-free distributions to cover eligible higher education costs.|
|Medical expenses. The IRS also allows penalty-free access to IRAs when taxpayers face certain difficulties. For example, if your medical expenses exceed 10% of your adjusted gross income, you may make a penalty-free withdrawal of up to the amount by which these expenses exceed the 10% floor. Similarly, if you have been unemployed for at least 12 consecutive weeks, you can take a penalty-free distribution to cover medical insurance premiums. Also, you are exempt from the early withdrawal penalty if you become disabled.|
|Military and public service personnel. Special rules apply to those on active military duty and to certain public safety employees.|
Remember that you will most likely owe regular income tax on the money withdrawn even if the withdrawal is penalty-free.