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posted Dec 15, 2024 1:21:18 PM

disabled, but not approved for disability yet

i had to withdraw from my IRA to help pay expenses for myself this year and keep getting denied, as usual per social security BS, but have been unable to work for years. i was dropped from medicaid so had to pay for my insurance out of pocket.  i also put money down on a house, as i was told i needed to use what i have in savings and retirement funds to be considered.  i’m going to have to take more out in january.  i am 51.  i was told that i wouldn’t be charged the 10% penalty and i’m hoping this is correct.  the money i take out in january will be to pay for my health insurance and costs (i have significant medical issues) as well as to hopefully pay off the house.

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1 Best answer
Level 15
Dec 16, 2024 5:11:59 AM

Allowable exceptions to the 10% early (before age 59-1/2) withdrawal penalty  are:

  1. Rollovers to another IRA (no tax due)
  2. Disability
  3. Medical costs exceeding 7-1/2% of AGI
  4. Separation from service at age 55 or older (pensions & 401K but not IRAs)
  5. Substantially equal periodic payments (SEPP)
  6. Military reservist called to active duty
  7. Public safety employees separated after age 50 (pensions & 401K but not IRAs)
  8. IRS levy
  9. Education expenses (Only IRAs; not available for withdrawals from 401k plans)
  10. Court ordered spousal payments (pensions & 401K but not IRAs)
  11. First time home buyer (up to $10K) (Only IRAs; not available for withdrawals from 401k plans). The IRS defines a first time home buyer as someone who had no interest in a primary home for 2 years prior to the date of closing on the home. This requirement also includes your spouse.
  12. Made to a beneficiary or estate on account of the IRA owner's death
  13. Unemployed Medical Insurance
  14. Age 59-1/2
  15. See the instructions for form 5329, for some other obscure exceptions http://www.irs.gov/pub/irs-pdf/i5329.pdf

Reference: https://www.irs.gov/pub/irs-pdf/p590b.pdf

 

2 Replies
Level 15
Dec 15, 2024 1:47:19 PM

There is an exception to the 10% early distribution penalty from an IRA 

  • Not in excess of your unreimbursed medical expenses that are more than a certain percentage of your adjusted gross income

Go to this IRS website - Additional tax on early distributions from traditional and Roth IRAs - https://www.irs.gov/taxtopics/tc557

Level 15
Dec 16, 2024 5:11:59 AM

Allowable exceptions to the 10% early (before age 59-1/2) withdrawal penalty  are:

  1. Rollovers to another IRA (no tax due)
  2. Disability
  3. Medical costs exceeding 7-1/2% of AGI
  4. Separation from service at age 55 or older (pensions & 401K but not IRAs)
  5. Substantially equal periodic payments (SEPP)
  6. Military reservist called to active duty
  7. Public safety employees separated after age 50 (pensions & 401K but not IRAs)
  8. IRS levy
  9. Education expenses (Only IRAs; not available for withdrawals from 401k plans)
  10. Court ordered spousal payments (pensions & 401K but not IRAs)
  11. First time home buyer (up to $10K) (Only IRAs; not available for withdrawals from 401k plans). The IRS defines a first time home buyer as someone who had no interest in a primary home for 2 years prior to the date of closing on the home. This requirement also includes your spouse.
  12. Made to a beneficiary or estate on account of the IRA owner's death
  13. Unemployed Medical Insurance
  14. Age 59-1/2
  15. See the instructions for form 5329, for some other obscure exceptions http://www.irs.gov/pub/irs-pdf/i5329.pdf

Reference: https://www.irs.gov/pub/irs-pdf/p590b.pdf