29May

While funds can be distributed from an IRA at any time if the owner is willing to endure penalization for it, there are some limited circumstances when money can be withdrawn or distributed from the account with no penalty suffered. Each of the exceptions has many detailed rules that must be followed in order to be exempt of the penalties, so it is with working with an IRA professional such as a lawyer to make sure you are following all the rules. Some of the exceptions are when the withdrawn money is going toward a portion of unreimbursed medical expenses that make up more than 7.5% of the taxpayer’s adjusted gross income. Another exception is distributions that are not more than the cost of medical insurance while unemployed. Disability, as defined by not being able to engage in any substantial gainful activity, is also an exception.

In the event that the IRA owner dies, amounts distributed to beneficiaries can be done without penalty. Any distributions in the form of an annuity or due to an IRS levy of the plan can be done without penalty, as well. Another exception is to buy, build, or rebuild a first home, as long as this remains under a $10,000 lifetime maximum. Lastly, there is an exemption for distributions that are not more than the qualified higher education expenses of the owner, their children, or grandchildren. To find out more, click this.

Unless one of these exceptions applies, the money in an IRA can only be withdrawn penalty free once the owner reaches the age of 59.5. Interestingly, non-Roth owners actually have to begin taking distributions of at least the minimum amounts starting on the April 1 of the year after they reach the age of 70.5. In the event that the minimum distribution is not taken, a penalty of 50% of the amount that should have been taken is incurred. The amount that is required to be taken is calculated based on a factor taken from an IRS table and is based on the owner’s life expectancy and his or her spouse, where applicable. In the event the owner dies, the distributions must still continue and these can be based on the life expectancy of the beneficiary, if there is one.

Given the exceptions to the rule and intricacies within them, it can help to speak to a professional before attempting to withdraw any funds from an IRA. This way you can ask any questions you might have and get a knowledgeable answer to help you out.

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