You invest in an IRA to live comfortably after retiring. Typically, you would never want to touch it, but what if you must? Well, the IRS makes it hard to dip into your IRA plan by assessing penalties on many withdrawals. They do this so you don’t thoughtlessly withdraw money that you don’t absolutely have to. However, there are exceptions even the IRS will allow. Here are just a few:
Medical Insurance – If you are unemployed, you may take penalty-free distributions to pay for medical insurance. You must meet the following criteria: you lost your job, have collected unemployment benefits for 12 consecutive weeks, you received the distribution during the current or next year that you received unemployment compensation and you received the distribution no later than 60 days after you were re-employed.
Disability – If a doctor determines that you are unable to engage in gainful employment (whether from mental or physical disability), you may take penalty-free distributions.
Home Purchases – If you are buying a first home, the IRS will allow you up to $10,000.00 penalty-free to use towards expenses. That amount is a lifetime limit (if you’re married, your spouse is allowed another $10,000.00).
While these exceptions are penalty free, they may be subject to state and/or federal taxes. These are just a few examples. This article goes over a few more in greater detail.