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In general, to withdraw funds penalty-free from an IRA you must be at least 59Â½ years of age and the account must have been open for at least 5 years. But there are several exceptions to that rule that let you escape paying the 10% Internal Revenue Service penalty, should you find yourself in dire need of money. You will, of course, have to pay ordinary income tax on the earnings withdrawn.
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Those exceptions include:
- Unreimbursed medical expenses â To pay unreimbursed medical expenses that are more than 7.5% of your adjusted gross income.
- Medical insurance â To pay medical insurance for yourself, your spouse and your dependents if you lose your job.
- Disabled â If you become disabled before age 59Â½, any distributions that you take because of your disability are not subject to the penalty tax.
- Beneficiary â You are the beneficiary of a deceased IRA owner.
- Annuity â You can receive distributions from an IRA that are part of a series of substantially equal payments over your life.
- Higher education expenses â If you paid expenses for higher education during the year, part or all of any distribution may not be subject to penalty.
- First home â You will not be penalized on a distribution used to buy, build or rebuild a first home. The distribution can’t be more than $10,000.
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