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.
- Short-term use of funds from your IRA. You withdraw money from your IRA, and replace the funds within 60 days
- If you are disabled
- If you are the beneficiary of an inherited IRA
- If you are a first-time home buyer (up to $10,000)
- If you are paying the cost of medical insurance (restrictions apply)
- If you have unreimbursed medical expenses exceeding 7.5% of AGI
- If you have qualified higher education expenses
- If you have qualified reservist distribution
- IRS tax levy on the qualified plan (recapture tax for annuity method change)
- If you are receiving a "series of substantially equal periodic payments" under an annuity method
- 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
by
Steven T. Merkel, CFP®, ChFC, is the Managing Director of wealth management operations for Piedmont Investment Advisors, LLC in Naples/Bonita Springs, Fla. Steve is a former U.S. Army air defense artillery officer and has been giving financial advice for more than 16 years. He is a Certified Financial Planner® practitioner and a Chartered Financial Consultant. Mr. Merkel has been featured and widely quoted in numerous publications including The New York Times, BusinessWeek, Entrepreneur, Consumer Reports, Investment News, Financial Planning Magazine and Fidelity's Stages Quarterly. He enjoys fishing, golf, military history, Miami Hurricane football and relaxing on the beaches of South Florida.
