What are the exceptions to the premature withdrawal penalty rules for IRA accounts?

By Steven Merkel AAA
A:

Generally, if you are under age 59.5 and you withdraw funds from your traditional IRA, you must pay an additional 10% tax penalty on this distribution of assets. There are several exceptions to the rule, which allow you to pull funds from your IRA prior to age 59.5, and avoid the 10% penalty.


  1. Short-term use of funds from your IRA. You withdraw money from your IRA, and replace the funds within 60 days

  2. If you are disabled
  3. If you are the beneficiary of an inherited IRA
  4. If you are a first-time home buyer (up to $10,000)
  5. If you are paying the cost of medical insurance (restrictions apply)
  6. If you have unreimbursed medical expenses exceeding 7.5% of AGI
  7. If you have qualified higher education expenses
  8. If you have qualified reservist distribution
  9. IRS tax levy on the qualified plan (recapture tax for annuity method change)
  10. If you are receiving a "series of substantially equal periodic payments" under an annuity method
  11. If you have direct IRA rollover from one plan to another, completed within 60 days.

(For a more thorough analysis on the IRA fees, refer to Avoiding IRS Penalties On Your IRA Assets.)

This question was answered by Steven Merkel

RELATED FAQS

  1. How does a qualified retirement plan early distribution work?

    Weigh the pros and cons of taking an early distribution from a retirement account. Most early distributions are subject to ...
  2. How does a defined benefit pension plan differ from a defined contribution plan?

    Learn the differences between defined benefit plans and defined contribution plans when reviewing employer-sponsored qualified ...
  3. What are the best ways to pay off my mortgage quickly?

    Learn how mortgage payments may be reduced and how to save thousands on mortgage loans by lowering the interest and principle ...
  4. How do deferred tax assets help in meeting retirement goals?

    Learn how tax deferred assets can help individuals achieve long-term financial goals such as retirement and how they differ ...
RELATED TERMS
  1. Self Invested Personal Pension (SIPP)

    A tax-efficient retirement savings account available in Great ...
  2. Elder Care

    Elder care, sometimes called elderly care, refers to services ...
  3. Gold IRA

    Definition of Gold IRA
  4. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...
  5. Leveraged Benefits

    The use – by a business owner or professional practitioner – ...
  6. Peri-Retirement

    A term for the period of time leading up to actual retirement. ...

You May Also Like

Related Articles
  1. Retirement

    How does a qualified retirement plan ...

  2. Professionals

    Are Longevity Annuities in 401(k)s a ...

  3. Professionals

    Why Retirement Advice Is Better But ...

  4. Professionals

    Coming Soon: Private Equity In 401(k) ...

  5. Professionals

    Ways To Cut 401(k) Expenses

Trading Center