Early IRA Withdrawal and the Definition of Permanent & Total Disability

Disability is one of the circumstances that may allow an early IRA withdrawal.

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The Internal Revenue Service may require a 10 percent early withdrawal penalty if you take a distribution from your individual retirement account before age 59 1/2. You might also have to pay taxes on the distribution at your regular income tax rate. However, if you become disabled, the IRS may waive the early withdrawal penalty, as long as you meet certain guidelines.

Proof of Disability

If you are claiming an exception to the early withdrawal penalty because of a disability, you must file IRS Form 5329 to claim the exception and attach supporting evidence. A mental or physical disability must prevent you from doing "substantial gainful activity." In addition, you must provide a doctor's statement supporting your claim. Although the IRS may waive the 10 percent penalty, income taxes are still due on distributions from a traditional IRA. For a Roth IRA, income taxes will be due on any account earnings unless the account is more than five years old.

Work Activity

The IRS definition of "substantial gainful activity" generally means work that is meaningful and productive and pays a regular wage or salary. If you have physical limits but earn money on a regular basis as a security guard or baby sitter, for example, you are doing substantial gainful activity. If a hospital or school takes you on from time to time as a volunteer, providing simple "make work" activities, the IRS would not consider the work substantial or gainful.

Doctor's Statement

Your doctor must expect your disability to be "of long-continued and indefinite duration," according to the Internal Revenue Code. This is the same general guideline that applies to the tax credit for the disabled that is available on IRS Form 1040.


A finding of disability by the Social Security Administration will usually be enough to prove your condition to the IRS. Social Security applies specific income guidelines to "substantial gainful activity," and these change regularly to account for inflation. As of 2013, Social Security considered anyone earning more than $1,040 a month, before withholding, to be engaged in substantial gainful activity. Social Security also requires a disability to have lasted, or to be expected to last, at least 12 months.