You can withdraw money from your IRA at any time, but there are often charges or earnings tax associated. The guidelines differ depending upon whether you have a Roth or a traditional IRA and, similar to a 401(k), the “magic” age is 59 1/2.
If you have a Roth IRA, your contributions are made with after-tax dollars. This indicates that withdrawals are exempt to income tax, no matter how old you are when you make a withdrawal. Charges, however, are a different story. Once you reach age 59 1/2, all of your withdrawals are tax- and penalty-free. If you’re under 59 1/2, you can withdraw loan that you’ve really contributed without paying a penalty. If you withdraw earnings on your contributions, or loan converted from a standard Individual Retirement Account, however, you’ll have to pay a 10% charge.
Because standard Individual Retirement Account’s are funded with pre-tax dollars, the guidelines for withdrawals are a bit more strict. Just like a Roth, as long as you’re 59 1/2, you can make withdrawals without paying a penalty, although you’ll pay earnings tax. If you’re under 59 1/2, though, you’ll want to hesitate before withdrawing funds– any amount you withdraw is subject to a 10% charge, plus the routine earnings tax.
There are some exceptions that permit you to take a withdrawal if you’re under age 59 1/2 without paying a penalty. These include:
Paying certified college costs for you, your children or grandchildren.
But be mindful, these exceptions undergo rigorous rules. If you’re under 59 1/2, make sure to get guidance before you take a withdrawal from your IRA.