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age 59.5 when the distribution occurs, the amount will be subject to an early-withdrawal penalty of 10% (of the amount withdrawn).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. I understand that I can withdraw from a 401k the year I turn 55 without the 10% penalty ...

    You are referring to the rule that states that distributions from your qualified plan (including 401k, profit sharing, money ... Read Answer >>
  2. How do you calculate penalties on an IRA or Roth IRA early withdrawal?

    Find out how to calculate the tax penalty on early IRA distributions, including why distributions from Roth accounts can ... Read Answer >>
  3. As a temporary resident of the US, can I withdraw funds from my Traditional IRA without ...

    Should you decide to invest in a Traditional IRA and receive a tax deduction for your contribution, the amounts that you ... Read Answer >>
  4. What are the exceptions to the early distribution penalty for a non-qualified Roth ...

    The exceptions are as follows: The distribution is made on or after the date you reach age 59.5 The distribution is made ... Read Answer >>
  5. Can I take money out of my Individual Retirement Account (IRA) while working?

    Can I take money out of my IRA plan if I'm still working? Yes, you can take money out of your IRA plan if you’re ... Read Answer >>
  6. Is my non-qualified Roth IRA distribution subject to taxes or early distribution ...

    The ordering rules must be applied to determine whether the distribution is subject to income taxes and/or the early distribution ... Read Answer >>
Related Articles
  1. Retirement

    9 Penalty-Free IRA Withdrawals

    If you need to take early distributions, find out which exemptions allow you to avoid expensive consequences.
  2. Retirement

    Traditional IRAs: Distributions

    By Denise ApplebyDistributions from Traditional IRAs must occur eventually. Until the owner reaches the mandatory distribution age, distributions are optional. The tax and penalty applied to ...
  3. Retirement

    SEP IRAs: Distributions

    By Denise Appleby Because the funding vehicle for an SEP is a Traditional IRA, the distributions rules of a Traditional IRA also apply to SEP assets.Traditional IRA Distributions. Distributions ...
  4. Retirement

    What's the Tax Hit on an IRA Withdrawal?

    How much taxes you'll pay on IRA withdrawals depends on a variety of factors. Use this guide to plan ahead.
  5. Retirement

    How an IRA Works After Retirement

    You've read a lot about saving for your future retirement with IRAs. But what happens to the account when the future is here, and you actually retire?
  6. Retirement

    Tax Treatment Of Roth IRA Distributions

    Learn the requirements for withdrawing funds tax and penalty free.
  7. Personal Finance

    5 Ways To Lose Your Retirement Nest Egg

    These common mistakes can put your savings at risk. Find out how to avoid them.
  8. Retirement

    5 Penalty-Free IRA Withdrawals

    Most Americans think that an IRA is locked up until they reach 59.5, and withdrawals before that date trigger taxes and a 10% penalty tax. This is not always true.
  9. Retirement

    Tapping Retirement Funds Early – Without A Penalty

    The IRS offers several ways to skirt the 10% penalty on early retirement distributions.
  10. Retirement

    Retirement Plan Tax Prep Checklist

    Here's a list of items you need to have in order by tax time, including paying attention to those pesky required minimum distributions.
RELATED TERMS
  1. Premature Distribution

    Any distribution taken from an IRA, qualified plan or tax-deferred ...
  2. Substantially Equal Periodic Payment - SEPP

    A plan that allows individuals who have invested in an IRA or ...
  3. Non-Qualified Distribution

    1) A distribution from a Roth IRA that occurs before the Roth ...
  4. Mandatory Distribution

    The amount an individual must withdraw from certain types of ...
  5. Required Minimum Distribution - RMD

    The amount that Traditional, SEP and SIMPLE IRA owners and qualified ...
  6. Qualified Reservist

    A member of the military reserve who is not actively serving ...
Hot Definitions
  1. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  2. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  3. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  4. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  5. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  6. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
Trading Center