There are two types of individual retirement accounts. A traditional IRA lets you deduct contributions from your taxable income, but you will have to pay taxes when you withdraw the money. A Roth IRA is funded with after-tax money. With a Roth, you pay taxes before you contribute and will only owe taxes on the earnings, not your contributions, when you withdraw money.
You can generally withdraw money from a traditional IRA without any penalty once you reach age 59 1/2.
At What Age Can I Withdraw from My IRA Without Penalty?
You can take money without penalty from a traditional IRA once you reach age 59 1/2, and you must begin taking money out of an IRA at age 70 1/2 according to a required IRA distribution by age table found in the IRS's Publication 590-B . Withdrawals before 59 1/2 may be subject to a 10 percent penalty from the Internal Revenue Service. That's in addition to the income taxes you will owe on any withdrawal from a traditional IRA. The money you withdraw from an IRA is generally taxed as ordinary income. Report any withdrawals on you IRS Form 1040 when you file your taxes.
Exceptions to the IRA Withdrawal Rules
There are some exceptions to the 10 percent penalty. You can withdraw traditional IRA money before age 59 1/2 up to $10,000 for a first-time home purchase, if you become disabled, for medical expenses over 10 percent of your gross income, for some qualified educational expenses and for health care insurance if you've been getting unemployment compensation for at least 12 weeks.
You can elect withdrawals under a "substantially equal periodic payments" provision, which requires you to take a specified amount regularly. You must agree to take these payments for at least five years or until you are 59 1/2. You won't be charged a penalty but must pay taxes on these withdrawals as regular income. Most financial advisers recommend against this option.
If you're taking money out of an IRA early for one of these purposes, make sure you understand the rules so you don't owe more tax than you planned.
Roth IRA Withdrawal Rules
Roth IRAs have different withdrawal rules. Because Roth contributions are made with post-tax money, you can withdraw them at any time with no tax and no penalty. However, if Roth contributions were rolled over from a traditional IRA, you can't withdraw them for five years or the 10 percent penalty will apply. You also will owe tax on Roth IRA earnings, but investment gains are withdrawn only after your contributions are exhausted.
- Charles Schwab: What is an IRA?
- IRS: IRA FAQs - Distributions (Withdrawals)
- IRS: Publication 590-B (2018), Distributions from Individual Retirement Arrangements (IRAs)
- IRS: Retirement Plans FAQs Regarding Substantially Equal Periodic Payments
- IRS: Retirement Topics - Exceptions to Tax on Early Distributions
- Forbes: The Basics Of Taking Hardship Distributions From Self-Directed IRAs
Bob Haring has been a news writer and editor for more than 50 years, mostly with the Associated Press and then as executive editor of the Tulsa, Okla. "World." Since retiring he has written freelance stories and a weekly computer security column. Haring holds a Bachelor of Journalism from the University of Missouri.