Rules Governing Withdrawals From IRA Accounts

by Emily Weller

When you place money into an IRA, you cannot access it the same way you can money placed in a savings account. Usually you must wait until you are 59 1/2 to withdraw money from an IRA without any penalties, though exceptions exist. In some cases, you must withdraw certain amounts from your IRA after you reach the age of 70 1/2.

Regular Distributions

Usually, you can begin to take distributions or withdrawals from your IRA after you turn 59 1/2 years of age. The distributions may or may not be taxed, depending on the type of IRA you have. If the distributions come from a traditional IRA, you will have to pay income tax on the amount you take out, if you deducted that amount from your income taxes the year you contributed it. When you withdraw from a Roth IRA after 59 1/2, you do not have to pay income tax on the distribution, whether it's an original contribution or earnings.

Early Withdrawals

When you withdraw money from an IRA before age 59 1/2, you'll typically also owe a 10 percent tax on top of any income tax. You will also need to pay income tax on the amount you withdraw early, unless it is from a Roth IRA, in which case you may only owe income tax on the earnings portion of the distribution, provided you've had the Roth for fewer than five years. For example, if you withdraw $1,005 from a Roth IRA that you opened two years ago, and $5 of that amount is earnings, you will owe income tax on $5. If you withdraw $1,005 from a traditional IRA, you will owe income tax on the full $1,005.

Early Withdrawal Penalty Exceptions

There are a few instances when you may withdraw before 59 1/2 without the 10 percent penalty. If you use the money to pay for educational expenses, you do not have to pay the penalty. Use up to $10,000 from your IRA to buy your first home and avoid the penalty as well. If you withdraw from your IRA to buy a house, you have to use the money within 120 days of the withdrawal or face the penalty. Other exceptions include withdrawing money when you are completely disabled and using the money to pay for medical expenses above 7.5 percent of your adjusted gross income.

Required Minimum Distributions

The year after you turn 70 1/2 years old, you must begin to take distributions from a traditional IRA. The IRS has determined required minimum distributions for people based on age, life expectancy and the amount in the account. If you don't take the required distribution after age 70 1/2, you will owe 50 percent of the amount you failed to withdraw as a penalty. However, you can leave money in a Roth IRA for the duration of your life without paying any penalties.

About the Author

Based in Pennsylvania, Emily Weller has been writing professionally since 2007, when she began writing theater reviews Off-Off Broadway productions. Since then, she has written for TheNest, ModernMom and Rhode Island Home and Design magazine, among others. Weller attended CUNY/Brooklyn college and Temple University.

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