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19 Ways to Withdraw IRA Funds Without Penalty

10002248We’ve covered a lot of ground on how you can get at your IRA funds in this blog, but here is an all-inclusive list of the ways I’ve come up with to withdraw your funds without triggering the 10% penalty.  This list is for Traditional IRAs only.

It is key to note that, although these exceptions allow the distribution of funds without triggering the 10% penalty, in most cases the account owner would still be liable for the ordinary income tax on distributions.  Consult your tax advisor for additional information.

19 Ways to Withdraw IRA Funds Without Penalty

We’ll start with the obvious:

1. Normal – Begin after age 59½
2.  Before Tax Due – Withdraw annual allowed contributions before the due date of your tax return – an example would be to withdraw your 2008 contributions (and any associated growth) before April 15, 2009.
3.  Excess Contributions – Withdraw excess contributions before the due date of your tax return – if you discovered that you had contributed more than allowed (due to income limits or error) you are allowed to remove the excess and any associated growth before the tax return is due for the year.
4.  Required Minimum Distributions – technically this one is covered by #1 above for most circumstances, but sometimes RMD is required of a person who has inherited an IRA, regardless of age.

Now we’ll move into some of the not-so-obvious methods, starting with SOSEPP.

Series Of Substantially Equal Periodic Payments

This is the classic Section 72(t) method for withdrawing funds without penalty.  Essentially you agree to continue taking the same amount from your IRA for the greater of five years or until you reach age 59½. There are three methods of SOSEPP:

5. Required Minimum Distribution method – uses the IRS RMD table to determine your Equal Payments.
6. Fixed Amortization method – in this method, you calculate your Equal Payment based on one of three life expectancy tables published by the IRS.
7. Fixed Annuitization method – this method uses an annuitization factor published by the IRS to determine your Equal Payments.

Additional Section 72(t) methods for taking distribution from your IRA include:

8. Qualified Higher Education Expenses – you can withdraw your IRA funds to help pay for college
9.  Death – If you die, your beneficiaries are able to take distributions from your IRA without penalty.
10.  Disability – If you are “totally and permanently disabled” by IRS definition, you can take distributions from your IRA without penalty.
11.  High Unreimbursed Medical Expenses – for yourself, your spouse, or your qualified dependent.  If you face these expenses, you are allowed to withdraw a limited amount (the actual expenses minus 7.5% of your AGI) without penalty.
12.  Medical Insurance Premiums – if you’ve lost your job and receive unemployment compensation, you are eligible to withdraw an amount to pay for your medical insurance premiums (with some additional limits).
13.  First-Time Home Purchase – up to $10,000 ($20,000 for a couple) of the costs of buying, building, or re-building a “first home”.  First home is determined if you had no present interest in a main home for two years prior to the purchase.

And lastly, here are a few additional ways that you can withdraw your IRA funds without penalty:

14.  Qualified Reservist – If you were called to duty after September 11, 2001 and serve for at least 6 months, you are allowed to make a withdrawal from your IRA during your active duty period without penalty.
15.  Divorce – although not a particular IRS regulation, multiple Private Letter Rulings have allowed divorced parties to “split” an IRA into two separate IRAs, both with the original restrictions on distribution.
16.  Roth IRA Conversion – when you convert your funds from a Traditional IRA to a Roth IRA, although you pay tax on the distribution, there is no 10% penalty applied.
17.  Rollover – using the 60-day period, you are eligible to have access to your funds without penalty as long as the rollover is completed within 60 days.
18.  Payment to Advisor/Investment Manager – you are allowed to authorize your custodian to pay your Advisor or Investment Manager from your IRA funds any fees for managing your IRA. This includes transaction fees and annual custodian fees.
19. Periodic Temporary “Relief” provisions – from time to time, as the situation merits, Congress will enact special legislation allowing individuals impacted (primarily) by natural disasters to access IRA funds without paying the 10% penalty. One notable example of such a provision was for victims of Hurricane Katrina.

Now, did your list have 25 different ways?  Perhaps I’ve overlooked some… let me know if you have other ways in your list that folks can withdraw IRA funds without penalty. Let me know what you think!

For additional information on most of these methods, see the IRA Owner’s Manual or click the IRA Owner’s Manual link at the top of the page.


  1. […] helping Steve through the couple of years before he reaches age 59½. Or perhaps one of the other exceptions to early withdrawal could apply for a portion of his income needs. At age 59½ he could have the entire amount rolled […]

  2. […] When you have a 401k plan and hard times befall you, you may wonder if there is a way withdraw money from your 401k. In some cases you can get to the funds for a hardship withdrawal, but if you’re under age 59½ you will likely owe the 10% early withdrawal penalty. The term 401k is used throughout this article, but these options apply to all qualified plans, including 403b, 457, etc.. These rules are not for IRA withdrawals (although some are similar) – see the article at this link for 19 Ways to Withdraw IRA Funds Without Penalty. […]

  3. […] you pay a 10% penalty in addition to the income tax on the distribution unless you meet one of the early distribution exceptions, such […]

  4. […] you pay a 10% penalty in addition to the income tax on the distribution unless you meet  one of the early distribution exceptions , such […]

  5. […] Upon reaching age 59½ you can access the funds without penalty – otherwise, unless you meet one of the early distribution exceptions, there is a 10% penalty imposed in addition to the income tax on the distribution.  At age 70½ […]

  6. […] be hit with an additional 10% penalty for an early withdrawal (unless your withdrawal meets one of these 19 exceptions). So now every dollar that you withdraw costs an extra 10 cents on top of the ordinary income […]

  7. dbwick says:

    given the recession, i’m wondering if any temporary relief has been enacted for unemployed persons who are not eligible for unemployment or who have exhausted UI benefits?

  8. klatt says:

    This was a good artical

  9. […] 19 Ways to Withdraw IRA Funds Without Penalty […]

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