You can withdraw cash from your IRA at any time, but there are sometimes charges or earnings tax associated. The guidelines vary depending upon whether you have a Roth or a traditional Individual Retirement Account and, just like a 401(k), the “magic” age is 59 1/2.
If you have a Roth IRA, your contributions are made with after-tax dollars. This indicates that withdrawals are exempt to income tax, no matter how old you are when you make a withdrawal. Penalties, however, are a various story. When you reach age 59 1/2, all of your withdrawals are tax- and penalty-free. If you’re under 59 1/2, you can withdraw loan that you’ve actually contributed without paying a charge. If you withdraw profits on your contributions, or loan transformed from a conventional IRA, though, you’ll have to pay a 10% charge.
Because standard IRA’s are funded with pre-tax dollars, the rules for withdrawals are a little bit more strict. As with a Roth, as long as you’re 59 1/2, you can make withdrawals without paying a charge, although you’ll pay income tax. If you’re under 59 1/2, however, you’ll wish to believe two times before withdrawing funds– any amount you withdraw undergoes a 10% penalty, plus the routine earnings tax.
There are some exceptions that allow you to take a withdrawal if you’re under age 59 1/2 without paying a charge. These include:
u2022 Paying qualified college expenses for you, your kids or grandchildren.
But be careful, these exceptions are subject to rigorous rules. If you’re under 59 1/2, be sure to get guidance prior to you take a withdrawal from your Individual Retirement Account.