What Are the Withdrawal Rules for an IRA?

Understanding the withdrawal rules for an Individual Retirement Account (IRA) can be challenging. The requirements differ based on your age and the type of IRA.

Knowing the withdrawal rules for an IRA helps you reduce your tax liability and avoid fees and penalties. The following information can help.

IRA Withdrawal Age

The IRA withdrawal age depends on whether you have a Traditional or Roth IRA:

Traditional IRA

• You can make withdrawals without penalties or fees from a Traditional IRA at age 59 ½.

• You must begin taking Required Minimum Distributions (RMDs) starting in April of the year following the year you reach age 73.

• If you were born before July 1, 1949, RMDs begin in April of the year following the year you reach age 72.

• The IRS calculates RMDs based on your life expectancy and your account balance on December 31^st of the previous year.

Roth IRA

• Generally, you must be at least 59 ½ and have held a Roth IRA for five years to withdraw funds.

• There is no required age to begin taking distributions.

• You can let the fund grow tax-free and be left to a beneficiary, if desired.

IRA Early Withdrawals

The rules for early withdrawal depend on the type of IRA:

Traditional IRA

Withdrawals from a traditional IRA before age 59 ½ typically are taxable and include a 10% federal penalty tax. The penalty can be waived under any of the following circumstances:

• Buying, building, or rebuilding your own home for the first time, meaning you have not owned a home in the previous two years

• Paying an IRS levy on back taxes by having the IRS take the money from your account

• Inheriting an IRA, unless you’re the spouse and roll the funds over to your own IRA

• Higher education expenses for you or your spouse, children, or a beneficiary

• Unreimbursed medical expenses that are more than 10% of your adjusted gross income

• Health insurance premiums while you are unemployed and have received unemployment compensation for 12 consecutive weeks

• Qualified reservist distributions for military reservists or National Guard members

• Substantially equal periodic payments or regularly withdrawn amounts over five years by pre-approved methods determined by the IRS

• Permanent disability and inability to work

Roth IRA Early Withdrawal

You can withdraw contributions to your Roth IRA at any time without paying taxes. The earnings are tax-free if you held the account for at least five years and reach age 59 ½. However, you pay a 10% penalty if you withdraw funds early.  

Exceptions to these requirements include:

• Becoming disabled and needing the funds to live on

• Needing Roth funds of up to $10,000 to buy your first home

• Distributions are being made to your heirs upon your death

IRA Hardship Withdrawals

You can withdraw from an IRA the exact amount needed to cover a hardship under the following circumstances:

• Medical care expenses for you, your spouse, your dependents, or a beneficiary

• Costs directly related to the purchase of your primary residence, excluding mortgage payments

• Tuition or related educational fees and room and board expenses for the next 12 months of postsecondary education for you or your spouse, children, dependents, or beneficiary

• Payments are required to prevent eviction from your principal residence or foreclosure on the mortgage on that residence

• Funeral expenses for you or your spouse, children, dependents, or beneficiary

• Certain expenses to repair damage to your primary residence

IRA Withdrawal Taxes

Taxes on withdrawals depend on the type of IRA you have and when you withdraw money:

Traditional IRA: Since you contributed to a traditional IRA with pre-tax dollars, you pay taxes on withdrawals. If you don’t make the RMDs, you pay a 50% tax on the amount of the distribution not taken.

Roth IRA: Because you paid taxes before contributing to a Roth IRA, you can withdraw money tax-free after you have held the account for five years and you reach age 59 ½.  

Receiving IRA Distributions

Consider setting up automatic withdrawals into a bank account for RMDs from a traditional IRA.

• Having a separate account helps avoid potential consequences of forgetting to take distributions.

• Contact the institution that holds your IRA and request a withdrawal by check, direct deposit, or another option.

• Be mindful that it could take five to seven business days to process your request.  

*This information is for educational purposes only.