When Can I Withdraw From My IRA Without Penalties?

by Craig Woodman

    Money you contribute to an individual retirement account, more commonly known as an IRA, is intended for your retirement, and you receive tax benefits for making these contributions. For this reason, the Internal Revenue Service imposes penalties for many of the withdrawals that you might make from an IRA before you reach retirement age. The standard penalty is 10 percent of the amount you withdraw. You can eliminate these penalties for certain IRA withdrawals depending on the reason for the withdrawal.

    At Retirement

    You can make withdrawals from your IRA penalty free when you become age 59 1/2. At that point, the IRS considers you to be at retirement age -- at least, for tax purposes -- and you can begin to withdraw the money from your IRA accounts without penalty to cover living expenses or for any other reason. Keep in mind that you must pay income taxes on your withdrawals since the money was not taxed when you put it into your account.

    Roth Contributions

    Because you fund a Roth IRA with after-tax money, the contributions are treated differently than with other before-tax retirement accounts. You can withdraw Roth IRA contributions at any time without penalty. The earnings on a Roth account, however, are typically subject to taxes and the 10-percent penalty if you are younger than age 59 1/2 or the account has been open for less than five years.

    60-Day Rollover

    You can withdraw funds from an IRA account and avoid any taxes or penalties as long as you redeposit the funds into the same IRA or a different account of the same type within 60 days. The IRS considers this a tax-free rollover. You can roll over the funds from an IRA account once in a 12-month period.

    Higher Education

    IRA withdrawals to fund your education or that of your spouse, or even your children and grandchildren, can be taken without paying the tax penalty. Allowable education expenses include tuition and fees for books and supplies. If the student is enrolled at least half time, you can use IRA withdrawals to pay for room and board without penalty.

    First-Time Home Purchase

    You are allowed to take withdrawals from your IRA account without penalties to purchase a first-time home. The lifetime maximum for these withdrawals is $10,000. If you are married, your spouse can also withdraw $10,000 penalty free. The IRS defines a first-time home purchase as making a purchase when you have not had an ownership interest in your primary residence within the last two years. Keep in mind, though, that even though your withdrawals will be penalty-free, you will still have to pay income taxes on them.

    Other Situations

    IRA withdrawals when you are completely disabled are penalty free. You must be unable to work, with the situation unlikely to change. You can also withdraw from your IRA without penalty to pay for medical expenses that exceed 7.5 percent of your adjusted gross income for 2012 -- that level rises to 10 percent for 2013. If you have been unemployed for 12 weeks or more and are receiving government unemployment benefits, you can withdraw from your IRA penalty free to pay health insurance premiums.

    About the Author

    Craig Woodman began writing professionally in 2007. Woodman's articles have been published in "Professional Distributor" magazine and in various online publications. He has written extensively on automotive issues, business, personal finance and recreational vehicles. Woodman is pursuing a Bachelor of Science in finance through online education.

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