IRA Withdrawals

IRA Withdrawals

IRA Withdrawals

You can withdraw money from your IRA at any time, but there are sometimes penalties or income tax associated. The rules vary depending on whether you have a Roth or a traditional IRA and, as with a 401(k), the "magic" age is 59 .

ROTH IRA's

If you have a Roth IRA, your contributions are made with after-tax dollars. This means that withdrawals are not subject to income tax, no matter how old you are when you make a withdrawal. Penalties, though, are a different story. Once you reach age 59 , all of your withdrawals are tax- and penalty-free. If you're under 59 , you can withdraw money that you've actually contributed without paying a penalty. If you withdraw earnings on your contributions, or money converted from a traditional IRA, though, you'll have to pay a 10% penalty.

TRADITIONAL IRA'S

Because traditional IRA's are funded with pre-tax dollars, the rules for withdrawals are a little more strict. As with a Roth, as long as you're 59 , you can make withdrawals without paying a penalty, although you'll pay income tax. If you're under 59 , though, you'll want to think twice before withdrawing funds any amount you withdraw is subject to a 10% penalty, plus the regular income tax.

There are some exceptions that allow you to take a withdrawal if you're under age 59 without paying a penalty. These include:

Paying qualified college expenses for you, your children or grandchildren

Paying to buy, build or rebuild your first home ($10,000 lifetime maximum)

Paying for medical expenses greater than 7.5 % of your adjusted gross income

But be careful, these exceptions are subject to strict rules. If you're under 59 , be sure to get advice before you take a withdrawal from your IRA.

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