Individual Retirement Account Withdrawals

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.

Roth IRA’s
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.

Traditional IRA’s
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.

Categories : Probate & Estate Planning