When to Start Withdrawing From a Traditional IRA
A traditional IRA allows you to save money for retirement on a tax-deferred basis. The Internal Revenue Service permits you to withdraw money at any time, but charges an early withdrawal penalty on nonqualified distributions.
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Identification
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Qualified distributions from a traditional IRA can only be taken once you have reached age 59 1/2. If you take money out before you turn 59 1/2, the IRS imposes a 10 percent early withdrawal penalty. However, this penalty does not apply to withdrawals taken for medical expenses exceeding 7.5 percent of your adjusted gross income, a permanent disability, higher education costs or up to $10,000 to buy your first home.
Warning
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The IRS subjects traditional IRAs to required minimum distributions, which start in the year you turn 70 1/2 years old. These distributions vary based on your life expectancy and your account size. Failure to take a required minimum distribution results in a 50-percent tax penalty.
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Considerations
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If you do not need the money, you should leave it in your traditional IRA as long as possible so that it can continue to grow tax-free. Once you take the money out, the growth is no longer tax-sheltered.
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