Traditional IRA Distributions
Traditional IRAs offer tax deductions for contributions and tax-sheltered growth while the money sits in the account. To discourage the use of traditional IRAs for investments other than retirement savings, the Internal Revenue Service imposes penalties on non-qualified distributions.
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Types
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Traditional IRA distributions are either qualified distributions or non-qualified distributions, depending on your age when you take the distribution from your traditional IRA. Any distribution taken before age 59 1/2 is a non-qualified distribution.
Warning
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Non-qualified traditional IRA distributions are subject to a 10-percent penalty on the taxable portion of the withdrawal on top of any income taxes owed.
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Documentation
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When you take a distribution from your traditional IRA, you will receive a form 1099-R from your financial institution that documents how much you took out and how much you must report on your income taxes.
Required Distributions
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The IRS requires that you start taking minimum distributions from your traditional IRA in the year that you turn 70 1/2. The size of the distribution depends on the size of your traditional IRA and your age.
Exceptions
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The IRS waives the early withdrawal penalty, but not the income taxes, on early withdrawals taken due to a permanent disability, medical expenses over 7.5 percent of your adjusted gross income, higher education costs, or up to $10,000 to buy your first home.
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