Retirement Distribution Rules

Withdrawal rules for Traditional IRAs

Taking distributions from your IRA require that you follow IRA guidelines. Regardless if you are retired or not quite there yet it’s important to know the rules when you need some cash and when you are required to take mandatory distributions.

Withdrawing from your IRA:

Taking money out of an IRA is simply referred to as a distribution. Since the account is set-up for your retirement savings, the tax advantages are designed with keeping the money in the account until retirement. If you withdraw the money out early you’ll miss out on many powerful tax benefits and reduce what you may have available when you need it, and you may also incur penalties for doing so.

Always consult your tax advisor about your particular situation and review the information outlined below for details about withdrawing from a Traditional or Roth IRA.

If you have an inherited IRA, there are different rules for those inherited assets and you may be required to begin distributions by a certain date, see MRD Rules section for Inherited IRAs for more details.

Withdrawals prior to age 59½:
Distributions from Traditional IRAs prior to age 59½ are subject to a 10% penalty, in addition to applicable federal and state taxes. Under certain circumstances, you may be able to avoid the penalty on early withdrawals. Common exceptions include:

  • First-time home purchase
  • Qualified education expenses
  • Death or disability
  • Unreimbursed medical expenses
  • Health insurance, if you’re unemployed

If one of these exceptions applies, then you may need to fill out IRS Form 5329 when you file your taxes. Please see the instructions on IRS Form 5329 and talk to your tax advisor for the most current regulations.

Withdrawals between age 59½ and 70½:
Starting at age 59½, you can begin taking money out of your retirement accounts without penalty. Keep in mind that you’ll have to pay any federal or state taxes that might be due. You should also consider creating a plan for taking distributions.

Withdrawals at age 70½ and beyond:
Starting at age 70½, owners of Traditional IRAs must begin making withdrawals, also known as minimum required distributions (MRDs), from their accounts. These withdrawals are mandatory and violations incur severe penalties. There is no MRD requirement for Roth IRAs during the lifetime of the original owner. The Precious Metals IRA custodians can help you calculate and manage your MRD.

Withdrawal rules for Roth IRAs

A qualified distribution from a Roth IRA is tax-free and penalty-free, provided that the five-year aging requirement has been satisfied and one of the following conditions is met:

  • Over age 59½
  • Death or disability
  • Qualified first-time home purchase

A non-qualified distribution is subject to taxation of earnings and a 10% additional tax unless an exception applies. For Roth IRAs, you can always remove post-tax contributions (also known as “basis”) from your Roth IRA without penalty. Consult your tax advisor about your particular situation. Unlike Traditional IRAs, there are no required withdrawals during the lifetime of the original owner.

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