What are the penalties for withdrawing from my Traditional IRA less than a year after acquisition?

By Denise Appleby AAA
A:

Withdrawals from your Traditional IRA will be treated as ordinary income, and if you are under age 59.5 when the distribution occurs, the amount will be subject to an early-withdrawal penalty of 10% (of the amount withdrawn). The amount will be exempted from the early-withdrawal penalty if you meet one of the following exceptions:

-You plan to use the distribution towards the purchase or rebuilding of a first home for yourself or a qualified family member (limited to $10,000 per lifetime).
-You become disabled before the distribution occurs.
-Your beneficiary receives the assets after your death.
-You use the assets for medical expenses for which you were not reimbursed.*
-Your distribution is part of a SEPP program.
-You use the assets for higher-education expenses.*
-You use the assets to pay for medical insurance after you lose your job.*
-The assets are distributed as a result of an IRS levy.
-The amount distributed is a return on non-deductible contributions.

* Limitations apply

(For related reading, see Avoiding IRS Penalties On Your IRA Assets.)

This question was answered by Denise Appleby.

RELATED FAQS

  1. Can I purchase mutual funds for my IRA?

    Learn how to invest your IRA assets in mutual funds. Discover a few of the different types of mutual funds available for ...
  2. What is the minimum amount of money that I can invest in a mutual fund?

    Learn about investing in mutual funds even with a smaller initial investment; there are many funds available to investors ...
  3. Can I purchase mutual funds for my IRA?

    Learn how to invest your IRA assets in mutual funds. Discover a few of the different types of mutual funds available for ...
  4. Who is eligible for a Teacher Retirement?

    Learn about the retirement option, the Teacher Retirement System, offered to teachers and other public school employees, ...
RELATED TERMS
  1. Asset Valuation Review (AVR)

    A process that establishes an estimate of the value of a failed ...
  2. Assisted Merger

    The merger of two or more financial institutions undertaken with ...
  3. Assuming Institution

    A healthy financial institution that purchases the assets of ...
  4. Acquisition

    A corporate action in which a company buys most, if not all, ...
  5. Elder Care

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

    Definition of Gold IRA
Related Articles
  1. If that's always been your dream, there actually are affordable ways to retire in France. Some regions to explore and some cautions to keep in mind.
    Retirement

    Can You Afford To Retire In France?

  2. A delightful climate, World Heritage sites and a low cost of living are just some of the reasons to retire to Ecuador. Here's more about what to expect.
    Retirement

    Why Retiree Expats Adore Ecuador

  3. The names sound similar – continuing care, assisted living – but retirement communities differ widely. How to tell them apart and what you'll need to pay.
    Retirement

    Don't Pick The Wrong Type Of Retirement ...

  4. Investing

    M&A Advisory Business Boutiques: How ...

  5. A description of the top retirement plans for self-employed
    Retirement

    Self-Employed? Top Plans For Retirement ...

Trading Center