An individual retirement account (IRA) is set up to assist you with saving money for your golden years. The Internal Revenue Service (IRS) permits you to begin making withdrawals from your account at the age of 59 and ½. Nevertheless, you can take withdrawals prior to this if you are willing to pay a penalty. For early distributions, the IRS makes you pay a 10% penalty fee. Depending on the amount you are withdrawing, this can be a hefty penalty. However, you are exempt from this in some instances.
In order to withdraw from your IRA free of a penalty, you must meet one of the below exceptions.
- You meet the age requirement (59 ½);
- You die or become disabled;
- You choose to make substantial, equal periodic payments;
- You are using the money to pay medical expenses, which you would submit as itemized deductions on your tax return;
- You are withdrawing the money to pay for child support of alimony;
- You are using the money to pay for a federal tax levy;
- You use the funds to pay for health insurance premiums;
- You are using the funds to pay for higher education related expenses, such as tuition, fees, books and supplies;
- You are purchasing your first, primary residence; or
- Your employment situation is as follows:
- You received unemployment compensation for a minimum of 12 months,
- You received funds from the IRA while you were receiving unemployment compensation or the years after,
- Alternatively, the IRA distribution is received less than 60 days after you have returned to work.
For some of these exceptions, certain qualifications or rules will apply. For example, when you purchase your first home using money from your IRA, there is a lifetime distribution limit of $10,000. The funds must also be used within 120 days after you have withdrawn them. Additionally, the funds must only be used on the first home and the buyer is the IRA account owner, their spouse or an ancestor.
Royal Legal Solutions
If you hold an account with a reputable firm, like Royal Legal Solutions, you have already made your first great investment choice. By allowing us to help you with your IRA, you can take advantage of any of our great services. Our professionals want the best for you and your account. We understand IRS, state and federal regulations that may apply to your account. By using Royal Legal Solutions to start your retirement account, you can feel secure in knowing we will help keep you from violating these regulations. Contact us today to find out more about the services Royal Legal Solutions provides.