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