Tap your IRA without penalty

NEW YORK (Money Magazine) -- Q. I lost my job this year. Much of my savings is in a traditional IRA account. If I were forced to tap it, what would be the penalty for early withdrawal?

Walter Updegrave, senior editor, says ...

If you pull money from a traditional IRA account before age 59½, you'll typically owe a 10% penalty on the taxable portion of the withdrawal (which is the entire amount unless any of the traditional IRAs you own contain nondeductible, or after-tax, contributions), plus income tax.

There's no way to avoid paying income tax, but there are exceptions to the early-withdrawal penalty.

Since you've lost your job, you may be able to withdraw funds penalty free to pay for health insurance.

Another exception is the 72(t) annuity rule. Under this exemption, you can avoid paying the extra 10% if you withdraw "substantially equal periodic payments" based primarily on life expectancy. Once you begin such withdrawals, however, you must continue them for five years or until you're 59½, whichever is longer.

For details about these and a few other penalty exemptions, check out IRS Publication 590: Individual Retirement Arrangements at irs.gov.

Got a financial dilemma? Go to cnnmoney.com/helpdesk to submit questions, read the Help Desk archive, and check out Help Desk videos. And tune in to CNN's Newsroom Tuesdays and Fridays, when Gerri Willis and other experts answer your questions.