When can I withdraw from my IRA?
You can withdraw money from your Traditional IRA at age 59½ or older. For Roth IRAs, you can make withdrawals at age 59½ or older if your account has been open at least five years.
If you withdraw money before this time, you will be subject to an early withdrawal penalty. However, there are some exceptions to this policy.
How are IRA withdrawals taxed?
The answer to this question varies based on the type of IRA:
- Traditional IRA: Withdrawals from a Traditional IRA are taxed as regular income, based on your filing status for the year in which you make the withdrawal.
- Roth IRA: Withdrawals from a Roth IRA are tax-free if you are 59½ or older and it has been five years since your first contribution.
What is an IRA early withdrawal penalty?
This is fee you will be charged if you make a withdrawal before age 59½. With a Roth IRA, there are some exceptions that allow you to withdraw before 59½ without a penalty. See exceptions
What is the tax rate for early IRA withdrawal?
An early IRA withdrawal will be subject to income tax, based on your filing status for that year, as well as a 10 percent additional tax penalty.
Are there exceptions to this penalty?
Yes, the IRS does offer exceptions for hardship. You may make an early withdrawal because of an immediate and heavy financial need, limited to the amount necessary to satisfy that financial need. The withdrawal will be taxed, but will not be subject to penalty.
With a Roth IRA, the early withdrawal penalty does not apply to withdrawals that:
- Occur because of the IRA owner’s disability.
- Occur because of the IRA owner's death.
- Are a series of "substantially equal periodic payments" made over the life expectancy of the IRA owner.
- Are used to pay for unreimbursed medical expenses that exceed 7½% of adjusted gross income (AGI).
- Are used to pay medical insurance premiums after the IRA owner has received unemployment compensation for more than 12 weeks.
- Are used to pay the costs of a first-time home purchase (subject to a lifetime limit of $10,000).
- Are used to pay for the qualified expenses of higher education for the IRA owner and/or eligible family members.
- Are used to pay back taxes because of an Internal Revenue Service levy placed against the IRA.