Taking Your Money Out Before the Law Allows
When you invest in a tax-deferred retirement plan such as a traditional IRA or a 401k, you receive a significant tax advantage. You do not need to pay tax on your investment gains until you reach retirement. In exchange for giving this benefit, the IRS restricts your access to your funds before retirement. If you want to take money out of a retirement plan before age 59 1/2, the IRS charges you a 10-percent penalty on your withdrawal. There are only a few exceptions that let your take out your money before the age limit set by the IRS. Instructions 1 Request an early withdrawal because of a disability. If you are permanently disabled, you do not need to pay the withdrawal penalty. 2 Demonstrate medical expenses that exceed 7.5 percent of your adjusted gross income. This includes the cost of medical care and health insurance premiums. You can make penalty-free early withdrawals to pay med...