When Can You Cash In an IRA without Penalty
When can you cash in an ira without penalty? You have worked hard for it, and putting money in an IRA or a Roth IRA is a terrific idea.
However, like most people who have worked hard to put all their money away, you have probably wondered when can you cash in an IRA without penalty.
Generally speaking, there is a 10% penalty on all withdrawals, which can be avoided under several circumstances.
If you are at least 59 1/2 years of age, you can withdraw from an IRA without a penalty. In fact, the IRS requires you to take deductions after you turn 70 1/2. But here’s some more cases, in case you can’t wait that long.
You may withdraw from an IRA without paying the penalty if you’re paying for medical expenses in excess of 7.5% of your Adjusted Gross Income.
With Obamacare being implemented, look for this number to increase to 10% when the healthcare program takes hold.
College expenses. You, your spouse, your children or your grandchildren’s college expenses will allow you to withdraw from the fund without a penalty.
If you’re using it to buy a home. The limit here is $10,000, so it can help you but you can’t take out a large sum of money but every bit helps.
This can only be done if you don’t declare the deduction on your taxes and if you do it in the same filing year.
If a sudden disability comes up, you can withdraw without a penalty.
There’s another method which is a one-time proposition from the IRS and should only be done if you’re desperate for cash.
If you have a traditional IRA, you can do what is called “substantial equal periodic payments”.
You must withdraw this amount. If you change your mind or don’t take that amount of money, then the penalty will be applied retroactively to the beginning of when you withdraw the money.
This continues until either you are 59 1/2 years old or five years have passed, whichever is longer.
A clearer understanding of other reasons that would allow you to cash in your ira can be found within the information that the account representative gave you.
You could always give them a call to if you have any additional questions.