Avoid Penalty for IRA Withdraw - Withdrawing from your IRA accounts before age 59½ may cost you a 10% penalty (in addition to any normal tax requirement). However, the IRS does offer some exceptions...
- School costs - No penalty required by IRS as long as the IRA money goes toward qualified schooling costs for...
- your spouse
- your children
- First home - Use up to $10,000 from IRA toward purchase of first home. Married buyers (both you and spouse first-time buyers) can each pull $10,000 from their respective IRA, yielding $20,000 in residential cash.
- IRS definition of first-time homebuyer - According to IRS, you are a "first-time homebuyer" as long as you ( your spouse) didn't own a principal residence at any time during the . Plus, the first-time homebuyer using IRA funds for a down payment can be you, your spouse, one of your children, a grandchild or a parent.
- You must use IRA funds within 120 days of withdrawal to pay qualified acquisition costs: costs of buying, building or rebuilding a home, or any usual settlement, financing or closing costs.
- Different treatment for Roth IRAs These homebuying IRA options apply to . As long as you have had the Roth IRA for five years or more, the $10,000 withdrawn for first home is a . So you can take out your Roth IRA retirement money without penalty--plus, because Roth earnings are tax-free, you'll have no IRS bill. If, however, your Roth IRA less than five years old, the withdrawal is an early distribution. As with a traditional IRA early withdrawal, a Roth holder can use the withdrawl for a first-home (avoiding the 10 percent penalty), but you might owe tax on earnings that are withdrawn.
- Other uses that can avoid penalty:
- Payment of excessive unreimbursed medical expenses.
- Payment of medical insurance premiums while unemployed.
- Total and permanent disability.
- Distribution of account assets to a beneficiary after you die.
|Retire Rich With Your Self-Directed IRA |
What Your Broker & Banker Don't Want You to Know About Managing Your Own Retirement Investments
by Nora Peterson