Taking money out of an IRA without penalty
Once you reach age 59½, you can take money out of an Individual Retirement Account (IRA) without penalty. If you take it out before then, you'll have to pay a 10% penalty tax unless your reason for taking it out qualifies as an exception, like using it to help pay for adoption expenses.
Qualifying reasons for taking money out of an IRA before age 59½ without penalty
The full list of exceptions can be found by visiting IRS.gov, but here are some situations that allow you to take money out of an IRA before age 59½ without having to pay a 10% penalty tax:
- Birth or adoption expenses: You can take up to $5,000 per child to help pay for birth or adoption expenses.
- Death: You can take money out if you inherit the IRA as a beneficiary.
- Disability: You can take money out if you’re unable to work due to a permanent disability.
- Disaster recovery: You can take up to $22,000 if you live in a federally declared disaster area and sustain an economic loss.
- Emergency expenses: You can take up to the lesser of $1,000 or your vested account balance over $1,000, once per calendar year, if you have a personal or family emergency, such as a medical bill or threat of eviction.
- Homebuyers: You can take up to $10,000 (lifetime total) toward the purchase of a home if you haven’t owned a home for two consecutive years prior.
- Higher education expenses: You can take money out to help pay for qualified higher education expenses.
- Medical expenses: You can take money out to help pay for unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI) or to help pay for health insurance if you’re unemployed.
- Terminal illness: You can take money out if you’ve been diagnosed with a terminal illness.
Reviewing the full list of IRS exceptions and discussing your situation with a tax professional can be helpful if you‘re considering taking money out of an IRA before you turn 59½ and want to avoid having to pay a 10% penalty tax.
This content was developed with the help of AI and reviewed by State Farm editors.
The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third-party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.
Neither State Farm nor its agents provide tax or legal advice.
