How to Withdraw IRA Monies Without Penalty

Individual Retirement Account (IRA) monies are supposed to be untouched until the individual reaches 59 1/2 years of age, becomes disabled or dies. However, there are exceptions to the penalty for early withdrawals.

Instructions

Difficulty: Moderately Easy

Things You’ll Need:

• Calculators
• File Cabinets
• Tax Services
• Pencils
• Calendars
• File Folders
• Notebook Papers
• Personal Financial Software
• Tax Preparation Software

1. Withdraw money from an IRA to which you contributed in 1999. You can do this until April 17, 2000 without penalty.
2. Withdraw IRA money equal to the year's qualified medical expenses minus 7.5 percent of your adjusted gross income. This is the amount that would equal your medical deduction on Schedule A.
3. Withdraw without penalty IRA money equal to college tuition, fees, books and supplies paid during the year.
4. Withdraw up to $10,000 without penalty to purchase a home if neither you nor your spouse has owned a house in the past two years.
5. Withdraw IRA money equal to health insurance premiums paid while you were unemployed.

Tips & Warnings

• You don't have to itemize deductions and use Schedule A to use the medical expenses exception. Use the same rules as someone who itemizes to find out how much you can withdraw without penalty.
• The college-expenses exception can be used for any qualified educational expenses after high school. The expenses can be for you, your spouse, children or dependents.
• The lifetime limit for the home-purchase exception is $10,000.
• The penalty for early withdrawal is 10 percent unless you qualify for an exception.
• IRA withdrawals made without penalty are still taxable in the same way they would be taxed if withdrawn after age 59 1/2. The exception to this is the earnings of a Roth IRA used for home purchase.
• Education IRAs can only be withdrawn for qualified educational expenses.