You can withdraw money from an IRA at any time, but the IRS charges a penalty and taxes on most withdrawals before age 59½

An IRA is designed to hold money until retirement. The tax break you get for contributing comes with a cost if you take the money out early: a 10% early withdrawal penalty on top of ordinary income tax on the amount you withdraw. If you withdraw $5,000 from a traditional IRA at age 40, you owe income tax on that $5,000 plus a $500 penalty to the IRS. A Roth IRA works differently—you can always withdraw the money you put in without penalty, but earnings come out taxed and penalized if you're under 59½.

Some withdrawals avoid the penalty entirely. The IRS allows penalty-free withdrawals for a first home purchase (up to $10,000 lifetime), medical expenses that exceed 7.5% of your adjusted gross income, health insurance premiums while unemployed, and a few other narrow situations. If none of those apply to you, a withdrawal before 59½ will cost you the 10% penalty plus your regular income tax rate.

Key Takeaways

  • Withdrawals from a traditional IRA before age 59½ trigger a 10% penalty plus income tax on the full amount withdrawn.
  • Roth IRA contributions can be withdrawn anytime without penalty, but earnings withdrawn before 59½ are taxed and penalized unless an exception applies.
  • The IRS allows penalty-free withdrawals for first-time home purchases (up to $10,000), certain medical expenses, and a handful of other hardships.
  • Your IRA custodian (the bank or brokerage holding the account) will withhold taxes on the withdrawal, but you may owe more or less when you file your return.
  • Withdrawals count as income in the year you take them, which can push you into a higher tax bracket or reduce other tax deductions.

How traditional IRA withdrawals are taxed

A traditional IRA holds pre-tax money. When you withdraw it, the entire amount is taxed as ordinary income at your current tax rate. If you earn $60,000 a year and withdraw $10,000 from your traditional IRA, the IRS treats that $10,000 as income, potentially pushing you into a higher bracket for the year.

Your IRA custodian—the bank, brokerage, or financial institution holding your account—will withhold federal income tax on the withdrawal. The withholding rate is 10% by default, but you can request a different amount on Form W-4P. If you're in the 22% tax bracket and withdraw $10,000, the custodian withholds $1,000, but you'll owe $2,200 in tax. You make up the difference when you file your return, or you get a refund if the withholding was too high.

If you withdraw before 59½ and no exception applies, add the 10% penalty on top. A $10,000 withdrawal at age 45 costs you $1,000 in penalty alone, plus whatever income tax your bracket requires.

Roth IRA withdrawals: contributions versus earnings

A Roth IRA holds after-tax money, so the rules are kinder on the surface. You contributed money that was already taxed, so you can pull out your contributions anytime, at any age, with no penalty and no tax. If you put $50,000 into a Roth over 10 years and withdraw $30,000 of it, you owe nothing to the IRS.

The catch is earnings. Money your investments made inside the Roth—dividends, capital gains, interest—is treated like a traditional IRA withdrawal. If you're under 59½, you pay income tax on the earnings plus the 10% penalty, unless an exception applies. The IRS assumes you withdraw contributions first, then earnings. So if your Roth has $50,000 in contributions and $15,000 in earnings, and you withdraw $40,000, the first $40,000 counts as contributions (no tax, no penalty). If you withdraw $60,000, the first $50,000 is contributions, and the last $10,000 is earnings (taxed and penalized).

There is one exception: if you've held the Roth for at least five tax years and you're withdrawing for a first-time home purchase, you can take up to $10,000 of earnings penalty-free. You still owe income tax on the earnings, but not the 10% penalty.

Withdrawals that avoid the 10% penalty

The IRS allows penalty-free early withdrawals in these situations:

  • First-time home purchase: Up to $10,000 lifetime from a traditional or Roth IRA. You must use the money within 120 days of withdrawal to buy, build, or rebuild a home. "First-time" means you haven't owned a home in the past two years.
  • Medical expenses: Withdrawals to pay unreimbursed medical costs that exceed 7.5% of your adjusted gross income. You must itemize deductions on your tax return for this to work.
  • Health insurance while unemployed: Premiums for health insurance while you're receiving unemployment benefits.
  • Disability or serious illness: If you become disabled or face a terminal illness, you can withdraw without penalty. The IRS defines disability narrowly—you must be unable to work and expect the condition to last at least 12 months or result in death.
  • Substantially equal periodic payments (SEPP): A complex rule that lets you withdraw a calculated amount each year without penalty, even before 59½. You must follow the formula exactly and continue for five years or until age 59½, whichever is longer. Missing a payment or changing the amount triggers penalties on all prior withdrawals.
  • IRS levy: If the IRS seizes your account to pay back taxes, the withdrawal is not penalized.

Even when the penalty is waived, income tax still applies. A medical expense withdrawal from a traditional IRA is taxed as income, just without the 10% penalty.

The tax withholding process and what happens at tax time

When you request a withdrawal, your custodian asks how much federal tax you want withheld. The default is 10% of the withdrawal amount. If you're in a 24% tax bracket and withdraw $10,000, withholding 10% ($1,000) leaves you short $1,400 at tax time. You can request higher withholding on the spot, or you can adjust it using Form W-4P.

State income tax is separate. Some states tax IRA withdrawals; others don't. Your custodian will not withhold state tax unless you request it. Check your state's rules or ask your custodian what applies to you.

When you file your tax return, you report the full withdrawal amount as income. The withholding you paid is credited against your total tax bill. If you withheld too much, you get a refund. If you withheld too little, you owe the difference. The withdrawal also counts toward your income for the year, which can affect other deductions—for example, if you're phasing out a child tax credit or claiming a deduction for student loan interest.

How withdrawals affect your taxes in the year you take them

An IRA withdrawal is added to your other income for the year. If you earn $50,000 in wages and withdraw $15,000 from your IRA, your taxable income is $65,000 (before deductions). This can push you into a higher tax bracket, meaning you pay a higher rate not just on the withdrawal but on some of your other income too.

Withdrawals can also trigger the net investment income tax, a 3.8% tax on investment income for high earners. If your modified adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly), part of your withdrawal may be subject to this tax on top of ordinary income tax.

For Social Security recipients, an IRA withdrawal can increase your taxable Social Security income, which means more of your benefits become taxable. The calculation is complex, but the effect is real: a $20,000 withdrawal might push $15,000 of your Social Security benefits into taxable income.

How to request a withdrawal from your IRA

Contact your IRA custodian directly—the bank, brokerage, or financial institution where your account is held. They have a withdrawal form you fill out. You'll specify the amount, the date you want the money, and how much federal tax to withhold. Some custodians let you request withdrawals online; others require a phone call or a form in the mail.

Processing time varies. Most custodians process withdrawals within three to five business days, though some take longer if you're selling investments first (stocks or mutual funds must be sold before the cash can leave the account). Ask your custodian for their timeline when you request the withdrawal.

The money is usually sent by check or electronic transfer to your bank account. If you're under 59½ and taking a withdrawal that will trigger the penalty, the custodian does not stop you—they process it and report it to the IRS on Form 1099-R. You pay the penalty when you file your tax return.

Frequently Asked Questions

Can I withdraw money from my IRA without paying the 10% penalty?

Yes, if you meet one of the IRS exceptions: first-time home purchase (up to $10,000), medical expenses over 7.5% of your income, health insurance while unemployed, disability, or a few others. You still owe income tax on the withdrawal unless it's a Roth contribution. If none of the exceptions apply, the 10% penalty applies.

What's the difference between withdrawing from a traditional IRA and a Roth IRA?

Traditional IRA withdrawals are fully taxed as income plus the 10% penalty if you're under 59½. Roth IRA contributions can be withdrawn anytime tax-free and penalty-free. Roth earnings are taxed and penalized like a traditional IRA unless an exception applies or you're 59½ and the account is five years old.

How much tax will be withheld from my withdrawal?

Your custodian withholds 10% by default, but you can request a different amount. The actual tax you owe depends on your tax bracket and other income. You may owe more or less when you file your return. Ask your custodian what withholding rate they recommend based on your situation.

Will my IRA withdrawal affect my Social Security benefits?

Yes, it can. An IRA withdrawal counts as income and may increase how much of your Social Security is taxable. The effect depends on your total income for the year. If you're near the threshold where Social Security becomes taxable, a large withdrawal can push more of your benefits into taxable income.

How long does it take to get my money after I request a withdrawal?

Most custodians process withdrawals within three to five business days. If you're selling investments first, it may take longer. Ask your custodian for their specific timeline when you submit the request.