Since you are not permitted to borrow from your Individual Retirement Account, you can make a penalty-free withdrawal under certain circumstances. The 10% penalty that applies to most early withdrawals from IRAs (before the account owner reaches age 59½) will not apply to the following types of withdrawals:
- Distributions made after the death of the account owner.*
- Distributions made due to disability of the account owner.*
- Withdrawals used to pay qualified medical expenses that exceed 10% (7.5% age 65 or older) of adjusted gross income.
- Withdrawals used to pay qualifying health insurance premiums for certain unemployed individuals.
- Withdrawals for qualified higher education expenses of the taxpayer, spouse, children, or grandchildren.
- Withdrawals for a qualified first-time homebuyer, subject to a $10,000 lifetime limit. The withdrawal must be used to acquire a principal residence of the taxpayer, spouse, child, grandchild, or ancestor. The withdrawal is permitted, generally, if the taxpayer has not owned a principal residence in the preceding two years.*
* If these distributions are made from a Roth IRA, they will also be tax-free provided the Roth IRA was held five years or more.
IMPORTANT NOTE: Be careful not to jeopardize your retirement savings by making withdrawals from your IRAs. Explore other ways to borrow first.