Sometimes, you just need access to your IRA account to make ends meet but you have heard about an IRS penalty for early withdrawal.  Are there any exceptions?

A person can make early withdrawals from their IRA without paying a penalty by utilizing covered exceptions under the tax laws.  The following outlines the general rule for early withdrawal penalty and a few of the more common options for withdrawal penalty free.  Please note, the following only outlines withdrawal penalties and not taxable consequences and I strongly recommend that before making an early withdrawal you should speak with a financial professional to consider the impact on your personal finances and each exceptions limits and criteria.

 The General Rule: If you withdraw from your traditional IRA when you are younger than 59 ½ you are subject to a 10% early withdrawal penalty in addition to the tax implications.

The Exceptions:  If you withdraw for any of the following reasons, you will avoid the 10% early withdrawal penalty:

1)      Higher Education Costs: For you, your spouse or the children of you or grandchildren of your or your spouse and classified as a college, university or vocational school eligible to participate in federal student aid programs.

2)      Medical Expenses: Non-reimbursed medical expenses exceeding a certain percentage of your adjusted gross income.

3)      Medical Insurance Premiums: If unemployed for at least 12 weeks.

4)      Set up an Annuity: Following an IRS approved distribution system based on life expectancy.

5)      First Home Purchase: $10,000 for a single person or $20,000 for a couple to buy your first home.

6)      Disability: Disability must prevent gainful employment.

7)      Turn 59 ½: Upon attaining age 59 1/2 , may make penalty free regular withdrawals for any reason.

For more information about early withdrawals from your IRA, please contact Vincent J. Russo & Associates, P.C. at (516) 683-1717.

By Jeffrey R. Neuman, Esq., Guest Blogger