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Step 1
Don't make any withdrawals before the age of 59 1/2. If you do, you'll have to pay a 10 percent early withdrawal fee. After 59 1/2 you can make penalty-free withdrawals.
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Step 2
Keep payments to a minimum and watch your age. The savings penalty on IRA distributions is 15 percent for withdrawals exceeding $155,000 annually. However, this amount is tax deductible.
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Step 3
Look at your policy. Most IRAs allow a minimum annual withdrawal of 10 percent without penalty. Review your policy or speak with your financial adviser to verify.
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Step 4
Wait until a life event. If you must pull money out of your account there are certain life events and situations which will allow you to make unlimited withdrawals with no penalty. Examples of such events are: permanent disability, payment of non-reimbursed medical expenses (expenses must be more than 7.5 percent of adjusted gross income), down-payment on a house ($10k lifetime limit for a first-time homeowner), the need to pay for certain higher education costs, or paying money to the IRS for back taxes (i.e. a tax lien).
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Step 5
Use withdrawals to pay for medical insurance premiums. If you're not working, you will not be penalized for using your IRA to pay your medical insurance premiums. Note: you must be unemployed for at least 12 weeks for this benefit to kick in.
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Step 6
Make all decisions about beneficiaries prior to age 70. After this date, you can't make any decisions regarding payouts, heirs, or distribution status. One way to avoid taxes after your death is to have the IRA rolled over to your spouse's IRA or set up a trust which will provide estate tax deductible payouts annually.
