You can withdraw money from your IRA at any time, but there are sometimes penalties or income tax associated. The rules vary depending on whether you have a Roth or a traditional IRA and, as with a 401(k), the “magic” age is 59 .
ROTH IRA’s
If you have a Roth IRA, your contributions are made with after-tax dollars. This means that withdrawals are not subject to income tax, no matter how old you are when you make a withdrawal. Penalties, though, are a different story. Once you reach age 59 , all of your withdrawals are tax- and 00004000 penalty-free. If you’re under 59 , you can withdraw money that you’ve actually contributed without paying a penalty. If you withdraw earnings on your contributions, or money converted from a traditional IRA, though, you’ll have to pay a 10% penalty.
TRADITIONAL IRA’S
Because traditional IRA’s are funded with pre-tax dollars, the rules for withdrawals are a little more strict. As with a Roth, as long as you’re 59 , you can make withdrawals without paying a penalty, although you’ll pay income tax. If you’re under 59 , though, you’ll want to think twice before withdrawing funds – any amount you withdraw is subject to a 10% penalty, plus the regular income tax.
There are some exceptions that allow you to take a withdrawal if you’re under age 59 without paying a penalty. These include:
- Paying qualified college expenses for you, your children or grandchildren
- Paying to buy, build or rebuild your first home (,000 lifetime maximum)
- Paying for medical expenses greater than 7.5 % of your adjusted gross income
But be careful, these exceptions are subject to strict rules. If you’re under 59 , be sure to get advice before you take a withdrawal from your IRA.