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When are My IRA Withdrawals Penalty Free?

The surest way to make tax-free withdrawals is to wait until you are older than 59½, but there are a few other ways.

If you are 59½ or older, you can make penalty-free withdrawals.

Of course, you will need to pay income taxes on the amount you withdraw from your Traditional IRA. There is a 10% penalty assessed by the IRS on early withdrawals (withdrawals made before age 59½) and these are generally not a good idea.

Early withdrawals for certain things will not incur the early withdrawal penalty; these things include college educational expenses, first-time homebuyers down-payments up to $10,000, health insurance premiums during unemployment, medical expenses over a certain percentage of income, and a few others.

Many people withdraw money from retirement accounts for the wrong reasons, such as paying off debts instead of finding a manageable debt consolidation plan. Suppose you wanted to withdraw money from your Traditional IRA to pay off debt.

If you are under age 59½, you will pay a 10% penalty fee as well as regular income taxes on the amount you withdraw.

Your attempt to get rid of debt through early withdrawals may result in more harm than good.

Keywords: retirement accounts, IRA, debt consolidation, 10% penalty, age 59 ½, 59 ½ rule,