What Is the Penalty for Closing an IRA?

There is one penalty for closing an IRA; however it has twofold consequences.
There are four exceptions to this rule.

Penalty for Early Withdrawl

According to IRS regulations, withdrawing money from an IRA account before the age of 59½ is subject to a 10 percent penalty.

Regular Tax

When IRA money is withdrawn early, the person is also subject to the regular tax one will pay for this money that will be included in your income.

Death

If a person dies before reaching the age of 59½, distributed IRA funds are not subject to the 10 percent penalty.

Disabling injury

The person who has a qualifying disability is not subject to the 10 percent penalty.

Medical Expenses

As of January 1997, you can withdraw funds from an IRA account to pay for medical expenses of in excess of 7.5 percent of your adjusted gross income. An unemployed person can use IRA monies to pay for health premiums for himself and his family.

Education

As of 1997, a person can use an IRA account to pay for qualified higher education expenses.

References

• Penalty-free IRA Withdrawls