Can I take money from my IRA without any penalty?

It depends. If you are 59½ or older, you can take money from your traditional IRA without penalty. In contrast, if you withdraw from your IRA before age 59½, the taxable portion of your distribution may be subject to a 10% penalty on top of whatever income taxes you owe on the distribution. This penalty, known as the premature distribution tax, is intended to discourage people from exhausting their IRA funds before they retire.

However, there are some exceptions to this rule:

  • Death or permanent disability of the account owner
  • A series of substantially equal period payments for the life of the account holder or the joint lives of the account holder and designated beneficiary
  • Unreimbursed medical expenses that exceed 7.5% of adjusted gross income
  • Up to $5,000 for each spouse (from individual accounts) for expenses related to the birth or adoption of a child; can be repaid within three years
  • Distributions taken by an account holder on active military reserve duty; can be repaid up to two years after the end of active duty
  • Distributions due to an IRS levy on the account
  • Up to $10,000 lifetime limit for a first-time home purchaser to buy, build, or improve a home
  • Health insurance premiums if unemployed
  • Qualified higher education expenses
  • Up to $22,000 for expenses related to a federally declared disaster (provided the distribution occurs within 180 days of the disaster)
  • Terminal illness, defined as a condition that is expected to cause death within seven years as certified by a physician
  • One distribution per calendar year of up to $1,000 for personal or family emergencies (restrictions apply; effective in 2024)
  • Up to $10,000 or 50% of the account value for account holders who certify that they are victims of domestic abuse during the preceding one-year period (effective in 2024)

The penalty also does not apply to amounts rolled over from one IRA to another (assuming you follow the rules for rollovers), to conversions of traditional IRAs to Roth IRAs, to amounts that the IRS levies from your IRA to cover your tax bill, or to qualified reservist distributions. Other exceptions may also apply.

Qualified distributions from your Roth IRAs are federal income tax — and penalty tax — free. Distributions are qualified if you satisfy a five-year holding period, and you are (a) age 59½, (b) disabled, (c) deceased, or (d) you have qualified first time home-buyer expenses. The taxable portion of nonqualified distributions from your Roth IRAs is subject to the same 10% penalty rules that apply to traditional IRAs. (Special rules may apply if you take a nonqualified distribution from your Roth IRA within five years of a conversion.)