What if I Need the Money in My IRA Before Retirement?

It is possible to withdraw money from an Individual Retirement Account without incurring a penalty, but it should be used as a last resort.

If you withdraw the money before age 59½, you will pay both a 10% penalty and regular income taxes on the amount you withdraw from a Traditional IRA.

However, there are special circumstances that allow you to make withdrawals without being charged the 10% penalty. These circumstances might include: paying for college expenses (whether for you, your grandchildren, etc.), paying for costs associated with a disability, medical expenses (must be greater than 7.5% of your adjusted gross income), and first-time home purchase.

You also have the option of taking 72(t) distributions from an IRA, which basically annuitizes your IRA. Substantially equal payments must follow a set a rules to be exempt from the early withdrawal penalty, and can be done with an annuity product or just systematic withdrawals.