Avoid the IRA Withdrawal Penalty

Posted on: March 9, 2016 By: Risk Management Blogging Team
Avoid the IRA Withdrawal Penalty

First-home, medical, or college bills may qualify for penalty-free IRA distributions.

If you withdraw money from your retirement account before you turn 59 years of age, you’ll have to pay a 10 percent early withdrawal penalty along with and income tax as it will count as revenue. If you’re looking to avoid, or bring as close to zero as possible, this fee here are some ways you can do just that.

  1. College costs. If you use your retirement money to pay for college for you, spouse, or grandchild, this is almost always discounted from the 10 percent penalty. This could, however, decrease your child’s chances for federal student aid as it will place him in a higher bracket.
  1. Medical expenses. You can use your IRA distributions to pay for medical bills that exceed 10 percent of your gross annual income. The distribution has to be in the same year as the medical expense!
  1. First home purchase. If you are buying, rebuilding, or building your home, or the home of a child, grandchild, or parent, you can take a penalty-free distribution of up to $10,000 ($20,000 for couples). The IRA considers you a first-time buyer if you or your spouse did not own a house 2 years prior to the home sale.
  1. Disability. If you are unable to do your job or any other job for that matter, you can qualify for an exemption from the early withdrawal penalty. Be prepared to prove it as a physician must determine that your condition will result in death or indefinite duration.

IRA Withdrawals don’t have to be consequential. If you are responsible and only take money for absolutely necessary payments, they won’t be! When looking for a policy suited for you, contact Risk Management LLC for all of your Brookfield, Wisconsin insurance needs!

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