Withdrawing Your Traditional IRA Funds by pfinancecr


									                                                     Withdrawing Your Traditional

                                                                               IRA Funds

Withdrawing Your Traditional IRA Funds

An important age to remember is 59 1/2 years in regard to your IRA.

Why? Because, if you haven't yet reached that magic age and you withdraw IRA monies, the
IRS will charge you a 10% penalty on the amount you withdraw in addition to income taxes
on the withdrawn amount. However, in certain circumstances, you can withdraw IRA funds
early without a penalty.

Exceptions to the Withdrawal Penalty Rule

  1. Active military reservists. Active military reservists can withdraw from their
     Traditional IRAs without penalty at any age. There are specific conditions to be met
     under this exception, including that you must be serving active duty at the time
     you make the withdrawal.

  2. Education costs. If you're paying for education-related costs for yourself, your
     children, grandchildren, or spouse, you can withdraw your traditional IRA funds early
     without penalty.

  • Ensure that you check the IRS's rules about this exception, as the school attended must
    meet their mandated requirements.

  3. A first home purchase. You can use up to $10,000 of your IRA funds without
     penalty if you use the money to help purchase your first home. If you're married, your
     spouse can also withdraw $10,000 from his or her own account as well.

  • Technically, you could have owned a home before purchasing the home you're hoping
    to use your IRA funds for. However, you can't have owned or lived in a home
    you owned for 2 years prior to the time you're using the funds to buy a

  • If your spouse owns the home you live in, you can't tap into your IRA funds without
    penalty for a home purchase.

  • You're required to use the funds within 120 days of obtaining them.

  • You can use your IRA money as a down payment on a home for your
    children, grandchildren, or spouse, as well as yourself.

  4. Other qualifying events. You may also withdraw from your IRA without a penalty if
     certain events occur:

  • If you become totally disabled, your IRA money is available to you without penalty.

  • If you aren't employed, you can withdraw from your IRA to pay your medical insurance

  • If you're the beneficiary of the IRA and the IRA holder dies, you can receive IRA

  • Also, if you have unexpected, "excessive" medical bills, you can access your traditional
    IRA money to pay them.

If you withdraw your IRA money for any of these reasons, you'll most likely need to
complete IRS Form 5329 to inform the IRS about why you withdrew the money. Also,
remember that in all these cases, you must still pay income taxes on the amount you
withdraw, just not the 10% penalty.

When You're Required to Withdraw Your IRA Funds

By April 1st of the year you turn 70 years old, it's required that you begin to pull
out your IRA money. The IRA has required minimum distributions (also known as RMDs).
If for some reason you haven't begun withdrawing your funds by age 70 1/2, the IRS will tax
you a significant amount of money each year you don't take your money.

Ensure you know when and how to withdraw your traditional IRA funds without penalty.
Effectively managing your money as you approach your retirement will make the difference
between good and great golden years.

Curtis Rose is an experienced professional with extensive experience in all
aspects of personal finance. Curtis writes and publishes articles, courses,
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