How to Make Early IRA Withdrawals Without Being Penalized

IRA withdrawal rules can be confusing. But understanding when you can make an early IRA withdrawal without getting penalized can mean the difference between buying a house or paying for a crucial medical treatment. Read on for ways to get around the 10% penalty that's usually applied to IRA withdrawals before the policy holder is 59.5 years old.

Difficulty: Moderate

Instructions

1. 
    

   The IRS' rules for early IRA withdrawal allow you to take money out of an individual retirement account prematurely if the money is being used to pay for college. The money can be used to pay for your own educational expenses, or for college for your children or grandchildren.

2. 
    

   First time homebuyers are given a one time pass when it comes to tapping their IRA. The IRS will not impose the 10% penalty on first time homebuyers as long as the withdrawal amount is less than $10,000. If you're married both you and your spouse can pull $10,000 from each of your accounts for a combined amount of $20,000. That's a great start for down payment.

3. If the IRA account holder becomes permanently disabled the IRA withdrawal rules allow money to be taken out of the account penalty free.

4. Uncle Sam will also grant you an exception if you're unemployed and you're using the money from your IRA accounts to pay for health insurance premiums OR for an extensive medical treatment that costs more than 7.5% of your adjust gross income.

5. You won't be charged the 10% penalty fee if you rollover the money in your IRA into a different retirement account. However, you must do a "direct rollover."

Resources

• Investing for Beginners
• Bankrate.com
• Early Withdrawal FAQ

[mamavic]

on 2/9/2009 good info especially in times like these when most people are needing this information

[keepingitsimple]

on 1/18/2009 Great info!