Can Funds Be Taken out of an IRA?

The IRS usually charges an extra 10 percent penalty for early IRA withdrawals.

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When you invest in an individual retirement arrangement, it is your own personal retirement plan. This means you can take your funds out whenever you want. There are no restrictions like there are with employer-sponsored retirement plans such as a 401(k). However, when you take money out of your IRA you will owe taxes and possibly a penalty depending on how you make your withdrawal.

Retirement Withdrawal

One way to take money out of your IRA is in retirement. To make an IRA retirement withdrawal, you need to be at least age 59 1/2. The taxes on your withdrawal depend on which IRA you use. When you make a retirement withdrawal from a traditional IRA, the entire amount is taxable. Since you never paid taxes on these IRA contributions or investment gains, you owe all this tax when you make the withdrawal. If you make a retirement withdrawal from a Roth IRA, you won't owe any taxes on the withdrawal (provided the funds have been held for five tax years). This is because you fund the Roth IRA with after-tax money and it grows your investments tax-free.

Early Withdrawals

If you need to take money out of your IRA before you turn 59 1/2, you are free to do so. You can take your funds out for any reason and don't need to qualify for a hardship distribution like you would for a 401(k) distribution. However, there is a cost to making an early withdrawal. If you take money out early from a traditional IRA, you will owe income tax plus a 10 percent penalty on the entire withdrawal. You can take your contributions out early from a Roth IRA and not owe any taxes. However, you'll owe income tax plus the 10 percent penalty on this amount if you withdraw your investment gains.

Penalty Exceptions

There are a few times when you can take money out of your IRA early and not pay the 10 percent penalty. If you are permanently disabled, you can take your money out penalty-free. You can also use your IRA to pay for qualified medical bills that exceed a percentage of your annual income established by the Internal Revenue Service. If you or a dependent are going to college, you can pay for the education costs out of your IRA. Lastly, you can take out up to $10,000 from your IRA penalty-free to buy your first home. These rules apply to all early withdrawals from traditional IRAs and to early withdrawals of investment gains from a Roth IRA. While these withdrawals avoid the penalty, they still incur income tax.


The only way to take funds out of your IRA is through a withdrawal. The IRS doesn't permit loans from IRAs. If you want to pay your withdrawal back into your account, it will count against your annual contribution limit. As of 2012, you can only invest up to $5,000 per year in an IRA, or up to $6,000 a year if you are age 50 or older. You can't invest extra money to make up for an early withdrawal. As a result, you should be careful with taking money out of your IRA as it can significantly set back your retirement plan.