One of the best ways to have enough money for retirement is to contribute to your IRA and leave it alone -- let the money grow. Take advantage of compounding interest and deferred taxes and, ideally, if you started the plan early enough you won't have to find a part-time job asking, "Paper or plastic?" when you're 70.

But if you want to retire early -- or if you're seriously strapped for cash and need to tap your IRA money -- there's a way to do it without triggering a penalty.

For the most part, if you take money out of an IRA before age 59½, you have to pay a 10-percent penalty on top of ordinary income taxes.

Avoiding the penalty
The exception is if you take the money out in "substantially equal payments" over your lifetime. Internal Revenue Service rules require that you take at least one payment annually for the exception to apply. Actuarial tables are used to determine life expectancy and, in essence, you're turning your retirement plan into an annuity, also called an "annuity distribution," or for the truly bureaucratic, "annuitizing an IRA."

Certified public accountant Darryl Hinkle of Hinkle & Richter in Pompano Beach, Fla., says he's seen very few people take advantage of this -- and for good reason.

"Say a 35-year-old guy has $100,000 in an IRA. He decides to take the money out. He'd have to take it out over 40 years -- so, he'd take $2,500 a year. This limits the ability for that money to grow. You have to swallow hard when you go into one of these things."

Furthermore, if our 35-year-old guy decided a couple of years later that he didn't need the $2,500 and wanted to reduce his payments to $2,000, the IRS would slap him with the 10-percent penalty. The rules say you can't change the payment plan for five years or until you reach age 59½, whichever is later.

Marriage makes a difference, too
If a husband and wife take the payments out together and one spouse dies before age 59½ or before they've had the account open for five years, the surviving spouse can adjust the payments based on his or her own life expectancy without penalty.

Hinkle says there are circumstances where it might make sense to take such an annuity distribution on a retirement plan.

"If someone's in their 50s and lost their job, he might say, 'I've got a half-million dollars here and I need to tap into it. What the heck, I'll start now.' That's more conceivable."

The annuity distribution can be set up as a one-life annuity or a two-life annuity for married couples. If it's a one-life and the person is 55 years old, according to the actuarial table that person will live an additional 28.6 years. If it's a two-life, based on the life expectancy of both spouses, the table says both will have died within 34.4 years. Simplified, if you have a $500,000 IRA and you opt for the single-life table you divide $500,000 by 28.6 for an annual payment of $17,482.52. Using the two-life annuity, you divide $500,000 by 34.4 for an annual payment of $14,534.88.

Be aware there are other situations that will qualify you to take money from your IRA without a penalty before you hit 59½. They include disability, buying a first home and paying medical expenses that exceed 7.5 percent of your adjusted gross income. If you're interested in tapping your retirement fund early, check with the IRS or your accountant to see if your account and situation will qualify.

Affected by Katrina?
If you live or lived in the Hurricane Katrina zone, you could qualify for a new exception to the withdrawal rule.

"This year, with Katrina, they've changed the IRS rules regarding IRAs for people who live in the Katrina zone," says Hinkle. "They can withdraw, after Aug. 25 of 2005 and before Jan. 1, 2007, up to $100,000 from any IRA without penalty."

Withdrawals are still subject to any applicable income taxes, he says. But account holders can also elect to spread that withdrawal income over three tax years. For example, "say you took out $100,000 to rebuild your house, you can recognize one-third of the withdrawal on your 2005 return, one-third on 2006 and one-third on 2007."

Anything over $100,000 would be subject to the normal 10-percent penalty, he says.

Says Hinkle, "The intent of the law is to enable people who lost their job, lost their home, don't have enough insurance, to take out enough to get their lives back together without having to pay a penalty."