How to Get Your Retirement Money Early Without Penalties

How to Get Your Retirement Money Early Without Penalties
So you’d like to use your retirement money before you retire but you want to avoid paying the penalty? Fortunately, there are ways to withdraw some of your IRA money before you reach your golden years and avoid paying that additional 10% in income tax.

Here’s how you can get your retirement money early without penalties.

Use the Money for College Costs

You won’t owe Uncle Sam any tax penalties if you withdraw money from your retirement savings to pay for costs associated with higher education. That applies not only to you, but also to your spouse, children, or grandchildren.

The allowable expenses to avoid the penalty include tuition, fees, books, and any supplies required for attendance. Room and board counts as well.

Buy Your First Home

If you haven’t yet bought a house, then you can withdraw money from your IRA account to make a first-time home purchase. That withdrawal will be free of penalties.

You’re limited to how much you can withdraw for a home purchase, though. If you’re single, you can withdraw a maximum of $10,000. If you’re married, you can withdraw a maximum of $20,000.

If you already own a home, then you can still use the money help your child, grandchild, or parent buy a first home. It’s still penalty-free.

If, for whatever reason, the purchase of the home falls through, you have 120 days to put the money back into the retirement account or you could incur that penalty for early withdrawal.
Pay for Medical Expenses

Another way to avoid the 10% penalty on early withdrawal of retirement money is to spend it on medical expenses.

You’re allowed to spend the money on unreimbursed medical expenses that exceed 10 percent of your adjusted gross income. For example, if your adjusted gross income is $80,000, than you can withdraw the money to pay for medical expenses that are in excess of $8,000. Note that the adjusted gross income figure is computed before taking the money from the retirement account.

Keep in mind also that the distribution must occur in the same year as the medical expense.
Buy Health Insurance

If you’re struggling to pay for health insurance, you should know that you could take an IRA distribution without penalty to pay the cost of your premiums.

The allowance here applies to health insurance for you, your spouse, and your dependents following a period of unemployment. However, you can only qualify for the allowance if you receive unemployment compensation for 12 consecutive weeks following a job loss.

The distribution must be taken in the same year that you received unemployment benefits or the following year.

Use It As a Disability Benefit

If you’ve become disabled so that you can’t work, you’re essentially eligible for early retirement. You can withdraw your retirement money early and avoid the penalty. You will, however, be required to provide medical evidence of your disability.

It’s always best to save your retirement money for retirement. However, if you need to make an early withdrawal, you can do so without penalty under certain conditions.

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