Are you familiar with the many IRA withdrawal rules? If you own an IRA it is essential to know the ins and outs of every withdrawal rule – even if you don’t think you will ever be affected.
An IRA is a great way to save for retirement. However, some people think about withdrawing their funds before reaching retirement agent.
Before we go any further, most people agree that it is best to keep money for retirement in your IRA. Don’t even consider touching this money until you reach retirement age and can begin to withdrawal the funds without penalty.
Your IRA Withdrawal Options
In short, you can withdrawal your money from an IRA at anytime. Many people find this hard to believe, but it is 100 percent true.
Of course, you have to be aware of the penalty and tax ramifications.
Generally speaking, if you withdrawal money from your IRA before the age of 59 ½ you will be assessed a 10 percent penalty. While there are some exceptions, it is best to check with your tax professional before you begin the withdrawal process.
What happens after I reach the age of 59 ½? This is the “magic number” at which time you can take IRA distributions without penalty. You can take as much money as you want from your account, whenever you feel like doing so.
You are not able to keep money in your IRA forever. Upon reaching 70 ½ you are required to take the minimum distribution. If you decide to ignore this and keep the money in your account the IRS will penalize you 50 percent on the total amount that should have been distributed.
With a traditional IRA, there is no way to avoid paying taxes on distributions. On the other hand, a Roth IRA is funded with after tax contributions. This means that withdrawals are tax free.
If you remember nothing else about IRA withdrawal rules, keep this in mind: it is best to withdrawal funds after the age of 59 ½. This allows you to avoid a 10 percent penalty.