Can I Withdraw From My IRA When it Matures With No Penalty?

Because they provide tax deferral benefits and are designed as retirement vehicles, IRAs carry a 10% penalty (over and above regular income taxes) for what the IRS calls an "early" withdrawal. "Early" simply means any drawdown by a participant that's younger than 59 and a half years old.

However, as with most tax-related topics, the IRA withdrawal question is complicated and includes several major exemptions. Here are the key points to know when you're determining whether you'll have to pay a 10% penalty to access your IRA funds.

Regular IRA rules

For a regular IRA, you generally have to pay the added tax if you are below the 59.5-year age threshold -- unless you meet one of these exceptions:

  • Death or disability
  • First-time home purchase
  • Qualified higher education expense
  • Medical expenses
  • Health insurance if unemployed

Each of these exceptions has fine print that defines the exact requirements to qualify. For example, qualified medical expenses only count if they are greater than 7.5% of your adjusted gross income. A first-time home purchase, meanwhile, only protects up to $10,000 of a withdrawal.

That's why it makes sense to review the details of any exemption you're hoping to claim (see the IRS' full exceptions list).

Roth IRA rules

Roth IRAs have an added twist when it comes to withdrawals. The same 59.5-year age threshold applies, as does the above list of exceptions. However, even if you meet one of these exceptions, any Roth IRA withdrawal is subject to the 10% penalty if it's within the first five years of opening the account.

This five-year period starts on the first day of the first tax year in which you contributed to the Roth. So, assuming you made your initial contribution on June 3, 2012, then January 1, 2012 is the start date of the Roth IRA for purposes of determining its age. Withdrawing funds at any time before January 1, 2017 (its fifth birthday) would subject you to the penalty.

Once your Roth IRA has matured past that five-year period, then your only withdrawal concerns are the regular age threshold and exception details outlined above (see the IRS' Roth IRA explainer).

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