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IRA accounts come with a penalty if you take out funds before you're legally retired. The IRA Withdrawal Calculator can help you figure out how much you'll be left with after taxes and fees.

Do you plan on withdrawing from an IRA early? Check out this guide on how to withdraw from an IRA early and avoid the withdrawal penalties at the same time.


Why use an IRA withdrawal calculator?

If you have an IRA, you know this is a great account option that helps you save for retirement and comes with great tax benefits. But there are times you may find yourself short on cash.

If you need to tap into your retirement savings, you need to be careful to avoid withdrawal fees and tax penalties. To model withdrawals without the penalty to see your tax obligation, set your age to 60 or older.

If you don't qualify for a penalty-free withdrawal, the calculator can help you determine how much to take out to offset your additional costs. You can easily work out your withdrawal amount and how much you'll receive after taxes.

The best way to avoid a penalty when withdrawing from an IRA early is by waiting until you're 59 1/2 years old or until you're legally retired. But if you need fast cash, there are some other exceptions.

Are you 59 1/2 years old?

The best way to avoid that withdrawal penalty is by waiting until you turn 59 1/2. Yes -- you have to wait six months after your 59th birthday to qualify for the withdrawal exemption.

At this age, you're too young to be considered legally retired. But if you decide to go into early retirement or just want the extra money, there's no penalty.

Keep in mind, income tax is still due when you withdraw early.

Do you need to pay for medical expenses?

If there's no other way to pay off your medical expenses, you can tap into your IRA without a penalty.

There are some exceptions. For example, your medical expenses can't be covered by your health insurance.

You also need to have income coming in. The medical expenses have to exceed your income by 10%. You'll still have to pay taxes on your IRA distributions.

Finally, you have to prove to the IRS you're that withdrawing from your IRA to cover medical expenses. This process is best done with assistance from your trustee or tax preparer.

You can use our IRA Withdrawal Calculator to determine the withdrawal amount you need. Then, you need to give this information to your trustee so they can gather the paperwork and send it over to the IRS.

Don't pay any medical bills until you get the money. Once you get that distribution, immediately pay off your medical bills. Save your receipts and fill out form 5329 so the IRS knows how much income tax you owe.

Are you paying for health insurance?

You can take IRA withdrawals to pay for health insurance. You can use this money to pay for your own health insurance or pay insurance for you, your spouse, and your dependents (or children).

Here are the rules. You can only use IRA distributions to pay for health insurance if you have no income. For example, you lose your job and need to pay health insurance while you're job hunting or are collecting unemployment.

This will only cover the insurance from your COBRA plan.

You'll only have COBRA insurance for 18 months after you lose your job. Contact your trustee, compile the necessary paperwork and send your COBRA paperwork and any unemployment documents as proof.

Do you need to cover college costs?

Whether you're the student or your child is the student, IRA distributions can pay for college expenses. These expenses include tuition, supplies, and other college-related fees.

If you or your child are full-time students, these distributions can also pay for room and board.

Keep in mind, taking IRA distributions for education can reduce your qualification for other programs such as financial aid.

To qualify, find out how much your distributions should be. Using the IRA Withdrawal Calculator can help you find out how much income tax needs to be deducted from your distributions.

You can easily figure this by setting your age to 60 and adding the amount to withdraw. Then, fill out forms 1040 and 5329 and send them to the IRS.

Is this your first home purchase?

Buying a house for the first time comes with a large mortgage contract and hefty mortgage expenses. But you can avoid this if you tap into your IRA.

You can withdraw up to $10,000 (or $20,000 if you're married) and avoid a penalty. You can use this money to buy or build your first home or if you haven't owned a home for the past two years.

These deductions can cover the down payment, financing, and the closing costs.

This also must be your main home -- you can't use IRA withdrawals to pay for a second or a vacation home.

To qualify, you must begin construction or enter a binding contract within 120 days of withdrawing the money. Send proof, such as construction receipts or a copy of the contract, to the IRS. Report your distribution on your taxes.

Do you have a disability?

Did you recently become a disabled citizen? If you're mentally or physically unable to work, you don't have to rely on social security. Instead, take IRA distributions.

There are only a few exceptions. You need to regularly see a physician, and your condition needs to be a disability under the medical and legal umbrella.

Your physician needs to sign a statement saying you're physically or mentally unable to work. This statement needs to be sent to the IRS.

Are you in the military?

Are you in the military and are on active duty? You can take IRA withdrawals without a penalty.

The only exception is you have to be on active duty for more than 179 days. Military veterans are also able to legally tap into their IRA penalty-free: the age is 55 instead of 59 1/2.

Do you need to set up an annuity?

Do you plan on using your IRA distributions as annuity payments?

If you'd like to use these withdrawals as lifetime streams, you generally won't have to pay the penalty or taxes when converting into an annuity. The only implication is that you still have to be at the retirement age to qualify for the penalty-free withdrawals.

Also keep in mind that these payments will still be subject to a certain amount of taxes.

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