IRA Withdrawals - Early Withdrawal from IRA’s without Penalties

There are times when it’s necessary to make an early withdrawal from your IRA, but you’d like to avoid penalties. Here’s a few ideas on how to make early withdrawals without incurring penalties.

Withdraw from IRA Without Penalty, Penalties of Mandatory Distributions

Author: Rocco Beatrice

IRA Withdrawals and IRA Penalties

Many people have questions in relation to understanding the different types of available IRA accounts and deciding on which one is best for them. The key is to remember that these accounts are designed to help you save for retirement, but most people forget to ask an important question: How do I get my money back?

The main purpose of an IRA retirement plan is not to just put money away as so many people believe. The purpose is to have that money available to you later in life when you retire. It is important to make sure all retirement account owners understand the IRA withdrawal rules and how to avoid IRA penalties if you do not abide by those rules.

Before discussing the rules and penalties, you must understand that you are putting your money into an IRA for retirement purposes. If you think you may need that money before retiring, it may be best to place some of the money into a savings account instead of an IRA. If you withdraw early from your IRA account, you will incur penalties and you will basically be giving money away. Unless entirely unavoidable, never withdraw funds early from your IRA.

There are two common questions that are asked. These questions will be explored and answered so that all IRA retirement account owners completely understand the rules and possible penalties.

When Can I Withdraw Without Penalty (for Traditional, SIMPLE or SET IRA)?

IRA withdrawal rules are generally based on age. You cannot withdraw any money from a Traditional, SIMPLE or SET IRA before you reach the age of 59 1/2. Mandatory withdrawals begin at age 70 1/2.

The mandatory distribution must begin on April 1 of the year after turning 70 1/2. If you turn that age prior to April 1, you may begin withdrawing that same year. Many people ask why there are mandatory distributions. The answer is because the government wants to make sure they receive the taxes that were deferred when contributions were made to the IRA.

The amount of each payment is derived by a formula chart using your life expectancy and the current amount in the IRA. The only exception to this is if your sole beneficiary is more than 10 years younger than you are. If that is the case, the formula will be based on a different chart to determine the minimum payment amount.

Roth IRA withdrawal rules are a little different. There is no mandatory distribution. You do not have to make withdrawals after 70 1/2 as in the case of a Traditional IRA, SEP or SIMPLE. This is because you have already paid the taxes on your contributions. However, you will incur a penalty if you withdraw funds and the account has not been open for more than 5 years. You also must be at least 59 1/2 to begin withdrawing from a Roth IRA.

What Happens if I Don’t Take Mandatory Distributions (for SEP, SIMPLE or Traditional IRA)? What are the penalties?

If after turning 70 1/2, you do not make the required withdrawals from a SEP, SIMPLE or Traditional IRA, you will have to pay additional taxes totaling 50% of the amount you were required to have withdrawn. People think that they will be avoiding the taxes if they do not take the withdrawal. This is not true. Instead, you will be paying double the amount in taxes. Always follow IRA withdrawal rules and make withdrawals when they are required. This will assure you will keep your money instead of paying additional penalty fees and taxes. Remember, this does not apply to a Roth IRA. A Roth IRA does not have any mandatory withdrawal rules.

About the Author:

Best IRA Rescue provides services on your IRA investments and traditional IRA and will help you reduce your inherited and beneficiary independent retirement account taxes in your estate assets. Roth on ROIDS is your advanced Roth IRA retirement planning strategy and one of the best IRA tax-savings strategies with benefits of a guaranteed death benefit, guaranteed principal, tax-free growth, and tax-free distributions from policy loans.
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