You can withdraw cash from your Individual Retirement Account at any time, however there are in some cases charges or earnings tax associated. The guidelines differ depending upon whether you have a Roth or a conventional Individual Retirement Account and, just like a 401(k), the “magic” age is 59 1/2.
If you have a Roth IRA, your contributions are made with after-tax dollars. This means that withdrawals are exempt to income tax, no matter how old you are when you make a withdrawal. Penalties, however, are a various story. Once 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 really contributed without paying a charge. If you withdraw profits on your contributions, or loan transformed from a conventional Individual Retirement Account, though, you’ll have to pay a 10% charge.
Because traditional IRA’s are funded with pre-tax dollars, the guidelines for withdrawals are a little more rigorous. Just like a Roth, as long as you’re 59 1/2, you can make withdrawals without paying a penalty, although you’ll pay earnings tax. If you’re under 59 1/2, however, you’ll desire to hesitate prior to withdrawing funds– any amount you withdraw goes through a 10% penalty, plus the regular income tax.
There are some exceptions that allow you to take a withdrawal if you’re under age 59 1/2 without paying a penalty. These include:
Paying qualified college expenses for you, your children or grandchildren.
But take care, these exceptions are subject to strict rules. If you’re under 59 1/2, make sure to get advice prior to you take a withdrawal from your Individual Retirement Account.