Withdraw From Your IRA Without a Penalty
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Withdraw From Your IRA Without a Penalty

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Individual retirement arrangements (IRAs) are a great way to stash money for retirement. They can also be a lifesaver when unexpected expenses arise.

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Individual retirement arrangements (IRAs) are a great way to stash money for retirement. They can also be a lifesaver when unexpected expenses arise. While it’s ideal to let retirement money stay put and accumulate interest over time, sometimes life happens and you need extra money now.
To discourage people from cracking open their retirement funds early (before age 59 ½), the IRS typically dings traditional and Roth IRA early withdrawals with a 10 percent penalty tax. But in certain circumstances, the bean counters will make an exception. Here are four cases that qualify.
School
Owing to the value of education, the IRS lets the penalty slide when you trade out IRA money for educational purposes. Qualified higher education expenses for you, your spouse, or your children include:
• Tuition and fees• Books and supplies

• Room and board (for students attending half-time or more)
The student must attend an eligible educational institution to qualify (any school that participates in the U.S. Dept. of Education student aid program is eligible). See Publication 970 at irs.gov for more details.
Home-Buying
Homebuyers can take penalty-free distributions of up to $10,000 towards acquisition costs of purchasing, building or re-building a first home. The home must be the homebuyer’s main residence. For married couples, both spouses must qualify as first-time homebuyers, and each can take up to $10,000. The date you enter into a contract to buy a home or the date building/rebuilding starts must be within 120 days of taking the IRA distribution.
Healthcare
You might not make it to the golden years if you can’t afford healthcare now. If you incur unreimbursed medical expenses, a distribution less than or equal to the expenses minus 7.5 percent of your adjusted gross income (AGI) may be exempt. Search Publication 502 at irs.gov for a complete list of allowable medical expenses.

For the unemployed, distributions less than or equal to the amount you paid for health insurance for yourself, spouse and dependents may also be exempt, if all the following conditions apply:
• You lost your job.

• You received unemployment compensation for at least 12 weeks.

• You take the IRA distributions the year during or the year following unemployment compensation, and no later than 60 days after you are re-employed.
On Duty
Military reservists get special treatment. The penalty tax for an early distribution is waived if called to active duty for a period of at least 180 days. The distribution must be made within the period of active duty.
Tapping your IRA can help in an emergency, but it may come at a price. Consider all your options before chipping away at retirement funds, and don’t let a penalty sink your account.

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