retirement

How to crack open your IRA without triggering a tax penalty

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Allowable, but not preferable, distributions
Allowable, but not preferable, distributions | Jenny Sturm/Shutterstock.com

Allowable, but not preferable, distributions

Early IRA withdrawals also are penalty-free in a few other instances. Unfortunately, most of these are hardship situations that no taxpayer wants to face.

Hardship circumstances for penalty-free withdrawals

  • Payment of excessive unreimbursed medical expenses.
  • Payment of medical insurance premiums while unemployed.
  • Total and permanent disability.
  • Distribution of account assets to a beneficiary after you die.

You also can get IRS-approved early access to your nest egg if you take IRA money on a specific schedule. Known as substantially equal periodic payments, this method allows you to begin withdrawing from your IRA early -- as long as the amounts are determined by an IRS-calculated life expectancy table.

And don't forget that the early withdrawal exceptions do not eliminate your tax bill if you take the money out of a traditional IRA. When you take the money out of such an account, regardless of your age or the purpose of the withdrawal, you'll owe your regular tax rate on the amount.

You may find you have other, more preferable options, such as taking out a personal loan.

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