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When Are IRA Distributions Allowed?

Normal distributions from your IRA are allowed after you reach age 59½. At this age, you may begin making voluntary withdrawals. Once you have reached the age of 70½, however, you are required by law to take distributions. There are IRS formulas that will help you determine how much you must withdraw after age 70½.

If you take a premature withdrawal before 59½, you will be charged a 10 percent penalty tax on top of the regular income taxes you'll owe on the withdrawn amount. However, you can withdraw without penalty under any of these exceptions:

You become disabled.
You die, in which case the money in the IRA is paid to your beneficiary.
You incur certain medical expenses. They must exceed 7.5 percent of your adjusted gross income and cannot be covered by insurance.
You pay health insurance premiums while unemployed. There are certain conditions you must meet to qualify for this exception.
You need the money to pay certain college expenses.
Your withdrawals are made as part of a series of equal annual withdrawals based upon your life expectancy.
Your withdrawals are made for first-time homebuyer expenses.

Although the rules can be complicated, knowing your withdrawal options will make withdrawing your IRA money a much easier and more cost-effective way to retire.