How Do I Withdraw Money From My Hsa Account

What Are the Withdrawal Rules for IRA Accounts?

An individual retirement account is a common vehicle used to save for retirement. This type of savings enables you to accrue tax-free or tax-deferred growth.

Types of IRAs

IRAs fall into three different categories, each with unique specifications and various advantages.

The traditional IRA enables consumers to make contributions that can be tax deductible. Earnings from this IRA can accumulate tax-deferred until withdrawn in retirement.
A Roth IRA involves making contributions with after-tax money, which means that the money can grow in a tax-free status. Withdrawals from this IRA in retirement will also be tax-free in many cases.
A rollover IRA involves contributing money that has been rolled over from another retirement plan into a traditional IRA. Often the other retirement plan is a 401(k).

IRA Age Withdrawal Rules

Traditional IRA rules allow withdrawals between the ages of 59.5 and 70. Consumers are allowed to withdraw between these ages without incurring penalties, but withdrawals are not required. It's important to remember that although withdrawals won't involve penalties, income tax will be due on part or all of the withdrawals.

Roth IRAs are more forgiving for early withdrawals. Account holders can take money out of a Roth IRA before age 59.5 in some situations. You can make a withdrawal up to $10,000 without penalty for buying, building or rebuilding a first home if you spend the money within 120 days. You can also make a withdrawal if you suffer a disability or if the money is withdrawn to give to your beneficiaries or your estate after you die.

IRA Penalty - Early Withdrawal

Traditional IRA early withdrawal rules state that any withdrawals made before age 59.5 will incur income tax as well as a 10 percent penalty. Early withdrawals from Roth IRAs will incur penalties if consumers make the withdrawals within five years of opening the account. This clock starts counting from day one of the tax year in which the first contribution was made.

Use an IRA Early Withdrawal Calculator

Before proceeding with an IRA withdrawal, it's wise to calculate how much you'll pay in taxes and penalties. Many financial institutions have IRA early withdrawal calculators on their websites, which enable you to enter the amount of the withdrawal, federal income tax rate, state income tax rate, the number of years until retirement and the annual rate of return expected in the time remaining until retirement. Many other financial websites also have early withdrawal calculators on their websites too.

Tips to Avoid Penalties

It may be possible to avoid penalties for early withdrawals from a traditional IRA in some of the following cases:

Making a withdrawal to pay for medical expenses not covered by health insurance and that are more than 10 percent of adjusted gross income won't incur a penalty.
Those unemployed who have collected unemployment compensation for 12 straight weeks can take an early withdrawal if its used to pay for health insurance.
Paying for college tuition and any associated expenses qualifies for penalty-free early withdrawal.
Active duty members of the military reserves can take a penalty-free early withdrawal as long as the active duty period is more than 179 days.