You can take money out of an IRA, but the IRS charges a 10% penalty on most withdrawals before age 59½, plus you owe income tax on the amount withdrawn

The core rule is simple: money in a traditional IRA or Roth IRA is meant to stay there until you turn 59½. If you withdraw it earlier, the IRS treats it as an early withdrawal and hits you with a 10% penalty on top of regular income taxes. A Roth IRA has a different structure—you can always withdraw the money you contributed (not the earnings) without penalty—but earnings still face the 10% penalty and taxes if you're under 59½.

The penalty exists to discourage people from raiding retirement savings. But the IRS does recognize certain hardships and situations where early withdrawal makes sense, and it has carved out specific exceptions where the 10% penalty does not apply. Understanding which exception (if any) applies to your situation determines whether you lose a chunk of your withdrawal to penalties or walk away with most of what you take out.

Key Takeaways

  • Early withdrawals from a traditional IRA before age 59½ trigger a 10% penalty plus income tax on the full amount withdrawn.
  • Roth IRA contributions can be withdrawn anytime without penalty, but earnings withdrawn before 59½ face the 10% penalty and income tax unless an exception applies.
  • The IRS allows penalty-free early withdrawals for specific situations: disability, medical expenses over 7.5% of income, health insurance premiums while unemployed, first-time home purchase (up to $10,000 lifetime), and substantially equal periodic payments.
  • You owe income tax on traditional IRA withdrawals regardless of whether the 10% penalty applies, and that tax is due when you file your return for the year you withdrew the money.
  • The IRS does not require your permission or approval to take money out—you initiate the withdrawal through your IRA custodian—but you must report it on your tax return.

How the 10% penalty and income tax work together

When you withdraw money from a traditional IRA before 59½, two separate costs hit you. The first is the 10% early withdrawal penalty, which applies to the amount you take out. The second is income tax at your regular tax rate, which also applies to that same amount. These are not the same charge—they stack on top of each other.

Example: You withdraw $10,000 from a traditional IRA at age 45. The 10% penalty is $1,000. If your tax bracket is 22%, you also owe $2,200 in income tax. Your total cost is $3,200, leaving you with $6,800 of the original $10,000. Your IRA custodian may withhold some of this automatically (usually 20% for early withdrawals), but you may owe more when you file your tax return if your actual tax rate is higher.

With a Roth IRA, the math is different because contributions and earnings are treated separately. You can withdraw contributions (the money you put in) anytime with no penalty and no tax. Earnings (the growth on that money) face the 10% penalty and income tax if withdrawn before 59½, unless an exception applies.

Exceptions where the 10% penalty does not apply

The IRS allows penalty-free early withdrawals in specific situations. You still owe income tax on the withdrawal, but the 10% penalty is waived. These exceptions are narrow and require documentation.

Disability: If you are unable to work due to a physical or mental condition that is expected to last at least 12 months or result in death, you can withdraw without the 10% penalty. You will need medical documentation to prove this to the IRS if audited.

Medical expenses: You can withdraw penalty-free to cover medical expenses that exceed 7.5% of your adjusted gross income (AGI) in that year. This includes insurance premiums, deductibles, copays, and other out-of-pocket costs. The withdrawal must happen in the same year as the expense or the year you file your return for that expense.

Health insurance premiums while unemployed: If you lost your job and are receiving unemployment benefits, you can withdraw to pay health insurance premiums without the 10% penalty. This applies only while you are receiving unemployment, and only for premiums for you, your spouse, and your dependents.

First-time home purchase: You can withdraw up to $10,000 lifetime from an IRA (traditional or Roth) to buy, build, or rebuild a primary residence. "First-time" means you have not owned a home in the past two years. This is a one-time limit across all your IRAs combined.

Substantially equal periodic payments (SEPP): If you set up a series of equal payments based on your life expectancy, you can withdraw without penalty before 59½. The payments must continue for at least five years or until you turn 59½, whichever is longer. This is complex and requires IRS-approved calculation methods; most people work with a tax professional to set this up.

How to actually withdraw money from your IRA

You do not need permission from the IRS or your employer. You contact your IRA custodian (the bank, brokerage, or financial institution holding your IRA) and request a withdrawal. Most custodians allow you to do this online, by phone, or by mail.

When you request the withdrawal, tell the custodian whether you want the money sent to your bank account or as a check. The custodian will ask how much you want to withdraw. If you are under 59½ and do not claim an exception, the custodian will typically withhold 20% for federal income tax. Some custodians may withhold more if you request it.

The money usually arrives within three to five business days. You will receive a Form 1099-R from the custodian showing the withdrawal amount, the amount withheld, and whether it was coded as an early withdrawal. You must report this on your tax return when you file.

What happens on your tax return

The withdrawal appears on your tax return as income in the year you took the money out. If you claimed an exception to the 10% penalty, you report that on Form 5329 (Report of Excess Contributions to Individual Retirement Arrangements). If no exception applies, you report the 10% penalty on the same form.

The income tax you owe is calculated based on your total income for the year and your tax bracket. The withholding your custodian took out is credited against this tax. If more was withheld than you owe, you get a refund. If less was withheld, you owe the difference when you file.

If you do not report the withdrawal or claim an exception you do not may have access to for, the IRS will catch it when it matches your Form 1099-R to your return. Penalties for underreporting can include additional tax, interest, and accuracy-related penalties.

Roth IRA withdrawals work differently

With a Roth IRA, contributions (the money you deposited) can be withdrawn anytime, at any age, with no penalty and no tax. This is one of the main advantages of a Roth. Earnings (the investment growth) are a different story.

If you withdraw earnings before age 59½ and before the account has been open for five years, you owe the 10% penalty and income tax on the earnings. If the account has been open for five years but you are still under 59½, you owe income tax on the earnings but not the 10% penalty (unless an exception applies). At 59½ with a five-year-old account, you can withdraw earnings with no penalty or tax.

The IRS uses a "pro-rata rule" if you have both traditional and Roth IRAs: withdrawals are treated as coming proportionally from contributions and earnings across all your accounts. This can complicate things if you have multiple IRAs. A tax professional can help you navigate this.

Alternatives to early withdrawal

If you need cash but want to avoid the 10% penalty, consider other options first. A traditional loan from your employer's 401(k) plan (if available) lets you borrow against your balance and repay it over time with interest—the interest goes back into your account, not to a lender. IRAs do not allow loans.

If you have a Roth IRA, withdrawing contributions costs you nothing in penalties or taxes, so that is always the cheapest option if you have contributions available. If you have a traditional IRA and may have access to for one of the exceptions, that is your next-best option because you avoid the 10% penalty even though you still owe income tax.

If you do not may have access to for an exception and the withdrawal is not urgent, waiting until 59½ eliminates the penalty entirely. If you need money now and have no other source, the early withdrawal with penalty may be your only choice—but understand the full cost before you commit.

Frequently Asked Questions

Can I put the money back into my IRA after I withdraw it?

Yes, but only within 60 days and only once per 12-month period. This is called a rollover. You must deposit the full amount you withdrew into an IRA (the same one or a different one) within 60 days, or the IRS treats it as a permanent withdrawal and you owe taxes and penalties. If you miss the deadline, you cannot undo it.

What if I withdraw from my IRA and then change my mind?

You have 60 days to roll the money back in. After 60 days, the withdrawal is final. If you do not roll it back and you were under 59½, you owe the 10% penalty and income tax on the amount, even if you later regret the decision.

Does withdrawing from an IRA affect my Social Security or other benefits?

IRA withdrawals do not directly reduce Social Security benefits, but they increase your income for the year, which can trigger taxation of your Social Security benefits if your total income crosses certain thresholds. They also do not count as income for means-tested programs like Medicaid or SNAP, but check with your state program to be sure.

Can my creditors take money from my IRA?

IRAs have strong creditor protection under federal law. In most cases, creditors cannot seize IRA funds even if you owe them money. Exceptions exist for certain tax debts, child support, and alimony. Bankruptcy law also has limits on IRA protection, though most IRAs are protected even in bankruptcy.

What if I inherit an IRA from someone else?

Inherited IRAs have different withdrawal rules depending on your relationship to the original owner and when they died. Spouses can roll an inherited IRA into their own IRA. Non-spouse beneficiaries must withdraw the balance over a set period (usually 10 years under current rules) and owe income tax on withdrawals, but the 10% early withdrawal penalty does not apply to inherited IRAs regardless of your age.