How to Withdraw From an IRA


Show Me the Money?

If you have sufficient cash in your individual retirement account for the intended withdrawal, the procedure could hardly be simpler: Write a check on the IRA account or withdraw the funds with a brokerage account debit card. Alternatively, phone customer service at the brokerage and ask a representative to mail you a check. Using a wire transfer from your brokerage account to your checking account is also possible, but it isn't recommended: It introduces almost the same delay as mailing a check and often incurs a wire transfer fee of as much as $25.

If you don't have sufficient cash in your IRA to cover the withdrawal, you will need to liquidate (that is, to sell) enough equities — whether stocks, bonds, mutual funds or exchange traded funds (ETFs) — to cover. You have two ways of doing this. Both involve a delay, because whenever you sell equities in a brokerage account, there is a three-day waiting period for the funds to clear -- that is, before you can remove the liquidated funds from the account. This isn't your broker being distrustful; it's required by the Securities and Exchange Commission.

You can either liquidate the funds yourself by selling sufficient equities for the withdrawal, wait three days for the funds to clear, then withdraw them with a debit card or a check on the account, or you can call your account representative and instruct her to liquidate the funds, then forward the funds to you by check when they clear. This introduces another slight delay for mailing but reduces the process to a single telephone call. If you're in a hurry, most brokerages will cut a check for you and hold it at the counter for pickup.

What Comes Next

Withdrawing the money is the easy part. What comes next is less so. If this is an early withdrawal, it may trigger a tax penalty. There are a few exceptions to the general rule, but unless your early withdrawal qualifies, you will have to pay both the usual income tax on the withdrawn amount and an additional 10 percent penalty.

If this is a qualified withdrawal after age 59 1/2, simply note the withdrawal on your Form 1040 at line 15b, pay the taxes due and you're done. If it's an early withdrawal, you'll also have to fill out a Form 5329 "Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts," where you'll calculate the additional taxes due before remitting them. In some instances -- when, for example, you've made multiple withdrawals from more than one retirement account -- you may want to turn this task over to your tax adviser.

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