Beware the 10% Premature Withdrawal Penalty from IRA’s and Qualified Plans. Also check your annuity polices you purchased some time back. Some have the same type of penalty.
During tough economic times it is tempting to withdraw funds from your retirement account. If you are younger than 59 1/2 years of age this can cost you 25% if you are in the 15% bracket (10% plus 15%) and upwards of 49% if you are in the highest bracket.
You can roll over one traditional IRA into another within 60 days once a year without penalty. You may be eligible for more than one rollover in a year if they are done electronically between institutions.
The most common exceptions to the penalty are:
- Regular monthly pension payments from qualified plans
- Medical Expenses that prove to be deductible under the 10% in excess of AGI rules
- Purchase of First home up to $10,000
There are several others. Check with your tax advisor before you take a distribution to determine the tax effects.