Tap your IRA without penalty

There are ways you can take funds out of your IRA without incurring the 10% early-withdrawal penalty.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Walter Updegrave, senior writer

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 59, 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 59, 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.  To top of page

Send feedback to Money Magazine
Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.