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When IRA withdrawals are penalty-free
You've been doing a great job of putting money away in an IRA for your retirement, but now you feel you need to raid your account to help with bills staring you in the face today. Can you pull out some cash without taking a financial hit?
IRA withdrawals made before you reach age 59 1/2 are generally considered premature distributions by the IRS. You usually owe any tax that might be due on the money, plus a 10 percent penalty on the amount.
Your home equity may be a better source of cash than your IRA. Still, there are times when the IRS says it's OK to use your retirement savings early.
In these cases, you'll avoid the typical early withdrawal penalties. However, you'll still owe any taxes due on the money you take out.