Can I Claim a Hardship on Early Withdrawals From an IRA?

by W D Adkins, studioD

One reality of life is that unexpected financial difficulties can happen to anyone. The Internal Revenue Service discourages people from taking money out of IRAs early but does recognize that it may be the only option in hardship situations. For this reason, you can take money out of an IRA early and without penalty for specified reasons.


Normally, if you make an early withdrawal from an IRA, you get hit with a 10-percent penalty tax on top of ordinary income taxes. The penalty tax is waived if the withdrawal is for one of the exception reasons the IRS allows. You still have to pay the income taxes you would pay if you took the money out after your retirement. Also, the amount you withdraw penalty-free is limited to the amount of the hardship expenses. If you have a Roth IRA, these rules apply to investment earnings, but not to contributions. Contributed funds can be taken out of a Roth IRA anytime without any penalty or tax liability.


There are many health-related reasons for which you can tap the money in an IRA. If you become permanently and completely disabled, you can take money out of an IRA without penalty. If you lose your job and get unemployment benefits for at least 12 weeks, you may pay health insurance premiums with IRA money. If you have medical expenses that exceed 7.5 percent of your adjusted gross income, you can use money in an IRA to pay the amount over 7.5 percent of AGI without incurring the penalty tax.

Other Hardship Withdrawals

When an IRA owner dies, his beneficiary can withdraw the money in the account with no penalty. There’s one exception, however: A spouse who treats the IRA as her own has to wait until she reaches age 59-1/2 or pay the penalty tax. You can use IRA funds without penalty to pay for a first home, qualified higher education costs or an IRS levy. Reservists called to active duty for six months or longer can withdraw IRA money penalty-free while they are on active duty.


IRS rules allow you to use IRAs to provide income penalty-free before you reach 59 1/2 if the distributions are set up as substantially equal annual payments. This arrangement must be set up for at least five years or until you turn 59-1/2. Once such an arrangement is made you have to stick with it.

About the Author

Based in Atlanta, Georgia, W D Adkins has been writing professionally since 2008. He writes about business, personal finance and careers. Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.

Photo Credits

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