According to the IRS, you can take a distribution from an IRA at any time. Unfortunately, unless it is qualified, you will be subject to a 10% additional tax and will be includible in taxable income. While there is a long list of qualified distributions, here are some of the most common:
• After age 59 ½ - Even if you have not yet retired, you can begin making distributions penalty free just before you turn 60.
• Qualified higher education expenses – Education for you, your spouse, or your child, can be covered, including tuition, fees, books, and supplies.
• First Home – For owner-occupied homes, you can withdraw up to $10,000 from your IRA for expenses like down payments and settlement fees. These payments must be made within 120 days of receipt of funds.
• Medical expenses – If you spent more than 10% of your Adjusted Gross Income on medical expenses, you can withdraw funds from your IRA. Additionally, you can cover health insurance premiums that you pay while you are unemployed.
A Note About Roth IRAs
Roth IRAs do allow these qualified disbursements as well, with one additional restriction: In order to qualify for a tax-free withdrawal, you are required to hold a Roth IRA for a minimum of five years prior to distribution.
A Final Note
If you can avoid making withdrawals on your Roth IRA until retirement, it is best that you do so. This way you will be able to grow your retirement account with the greatest tool at our disposal: time. However, if you do choose to withdraw early, it is important to avoid penalty fees for your overall financial health. If you choose to pursue these opportunities further, it is a good idea to talk to an IRA expert for more information.