Since you are in the process of planning for yours and your family’s future once you have reached your retirement age, it is but natural for you to have tons of questions with regard to the best retirement plan suited for your needs and your plans. And should you decide to go for a self-directed IRA, it is a must for you to take note of your inquiries to clear out any doubts, assumptions and even your fears. Now, if there is one that is often asked, the most popular self directed IRA FAQ would definitely be what the penalty exemptions would be, when it comes to IRA withdraw rules.
Self Directed IRA FAQ: What is an Early Withdrawal of IRA?
There are specific age brackets when it comes to withdrawing specific amounts from their IRA funds. Knowing what an early or pre-mature IRA funds withdrawal is also another self directed IRA FAQ. So to answer this question, if you are below 59 ½ years old, and you decide to distribute and withdraw funds, this will be considered early IRA fund withdrawal. Such transactions will be subjected to a 10% penalty plus taxes from the State and the Federal Government. These penalties apply unless your reasons are part of the rules exemptions and considerations.
Penalty Free IRA Withdrawals
In every rule, there are surely exemptions. But these should not be abused and taken advantage for the simple reason that you will be caught and penalized. With this in mind, you have to really make sure that your reasons for withdrawing or distributing your IRA funds earlier than the prescribed age meets the rules for penalty exemptions. Here are some of the exemptions you need to know:
- Unreimbursed Medical Expenses – people who do not have medical insurance policies or those who have medical expenses amounting to more than what the insurance can cover, may withdraw funds from their IRAs. Make sure that the difference in the total amount is between your unreimbursed medical expenses and 7.5% of your adjusted gross income or AIG.
- Disability – if you are determined to be unable to find regular or even contractual employment due to your mental or physical disability, you are eligible to withdraw from your IRA without paying any penalty.
- Medical Insurance- for those who have lost their jobs or those receiving unemployment compensation for 12 consecutive weeks, may withdraw early without penalties. Consult with your IRA custodians or experts for more information on the exemption stipulations.
- Education expenses – in case one needs to acquire higher education or their spouse or children need tuition fee assistance, they can take advantage of the penalty free distribution.
- Home Purchases – this include those who are buying, repairing or building their first homes.
For more detailed answers to your top self directed IRA FAQ, relying on the help of the experts and IRA professionals and advisers can definitely make sure that they will be able to deal with their chosen retirement solution out of the many types of retirement plans.
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