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Avoiding Penalties On IRA Withdrawals

Here's a common question on our site; "How can I withdraw from my IRA or 401k and not pay a penalty?"

A recent WSJ article provides answers:

For IRAs, the taxpayer may be able to avoid a penalty (but not tax) if he or she uses the money for one of several reasons, including:

  • To buy a home (if qualified as a first-time homebuyer under IRS rules).
  • To pay for higher education for the immediate family.
  • To pay for unreimbursed medical expenses over 7.5% of adjusted gross income.
  • To pay for health insurance if the taxpayer has been unemployed for a certain period.

For 401(k)s, the taxpayer can make an early withdrawal without a penalty in several cases, including if he or she:

  • Leaves the employer in the year he or she turns 55 or older.
  • Uses the money to pay unreimbursed medical expenses over 7.5% of adjusted gross income
Posted on Friday, May 8 by Registered CommenterWise Owl in | Comments Off