Early Withdrawal IRA Rules for Senior Citizens

I had a reader Wallace send in this question:

What is the law regarding premature IRA CD withdrawals by senior citizens without penalty?

The law regarding premature IRA withdrawals depends on the type of IRA you have. If you have a Roth IRA, you can withdraw your principal without penalty as long as it’s been in the account for five years.

If it’s a Traditional IRA, you pay a 10% penalty in addition to your marginal tax rate if you are under the age of 59 1/2.

There are a few exceptions to the 10% early withdrawal penalty that may apply to your situation:

  • You are permanently or totally disabled,
  • You are unemployed and are paying for health insurance premiums,
  • You are paying for college expenses for yourself or a dependent,
  • You are paying for medical expenses exceeding 7.5% of your AGI,
  • Or the IRS has levied your retirement assets to pay off your tax debt.

If you fit any of those categories, you avoid the 10% penalty but you still have to pay your income tax on those funds.

Please consult with a tax professional before making any decisions, rules are constantly changing and this information may be out of date.