Since IRA money is designated for retirement, distributions before age 59 ½ are subject to income taxes, plus a federal tax penalty of 10 percent. Only in some case can money can be withdrawn before 59 ½ without tax penalty. These conditions include: disability, catastrophic medical expenses, qualified higher education expenses, and to purchase, build, or rebuild your first home.

You also may be exempt from penalty if your payments are in the form of substantially equal periodic payments over your lifetime, if you are the beneficiary of a deceased IRA owner, the distribution is due to an IRS levy of the qualified plan. (A more restrictive list of exceptions applies to Roth IRAs.)

You will still pay income taxes on your traditional IRA earnings no matter when you withdraw your money.


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