retirement

What are tax and penalty-free withdrawals?

 

 

What are tax and penalty-free withdrawals?

The Bankrate.com financial term of the day is: "tax and penalty-free withdrawals."

If you want the advantages of an individual retirement account, or IRA, you've got to play by the rules and not touch your money before age 59 ½, or you'll usually get hit with a tax penalty. But under certain circumstances, you can take tax and penalty-free withdrawals. For example, you can pull money out and not pay the price as long as you put it back within 60 days. There also might not be a penalty if you need cash because you've become disabled and have expenses, if you're buying your first home, have higher education costs or high medical bills.

Try to take your retirement money out of an IRA too early and it'll cost you, unless you meet the requirements for tax and penalty-free withdrawals.

For answers to all of your retirement questions, visit the Retirement section at Bankrate.com.

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