IRA Withdrawals

You can withdraw loan from your Individual Retirement Account at any time, but there are sometimes penalties or earnings tax associated. The guidelines vary depending on whether you have a Roth or a conventional IRA and, as with a 401(k), the “magic” age is 59 1/2.

Roth IRA’s
If you have a Roth IRA, your contributions are made with after-tax dollars. This implies that withdrawals are exempt to income tax, no matter how old you are when you make a withdrawal. Penalties, though, are a different story. As soon as you reach age 59 1/2, all of your withdrawals are tax- and penalty-free. If you’re under 59 1/2, you can withdraw cash that you’ve really contributed without paying a penalty. If you withdraw profits on your contributions, or money transformed from a standard IRA, though, you’ll have to pay a 10% charge.

Traditional IRA’s
Because standard Individual Retirement Account’s are funded with pre-tax dollars, the guidelines for withdrawals are a bit more stringent. Similar to a Roth, as long as you’re 59 1/2, you can make withdrawals without paying a charge, although you’ll pay income tax. If you’re under 59 1/2, though, you’ll wish to hesitate prior to withdrawing funds– any quantity you withdraw goes through a 10% charge, plus the regular income tax.

There are some exceptions that allow you to take a withdrawal if you’re under age 59 1/2 without paying a charge. These include:
u2022 Paying qualified college expenses for you, your children or grandchildren.

But take care, these exceptions are subject to strict guidelines. If you’re under 59 1/2, make certain to get suggestions before you take a withdrawal from your IRA.