How IRA withdrawals work and what you need to know first
An IRA withdrawal moves money from your retirement account to your bank account or as a check. The process itself is straightforward—you contact your IRA custodian (the bank, brokerage, or investment firm holding your account), request a withdrawal, and they send the money. What matters is when you withdraw and how much, because those two things determine whether you owe taxes, penalties, or both.
The IRA rules split into two main paths: traditional IRAs and Roth IRAs. Traditional IRA withdrawals are taxed as ordinary income in the year you withdraw. Roth IRA withdrawals of contributions (the money you put in) are never taxed, but earnings (the growth) are taxed if you withdraw before age 59½ and haven't held the account for five years. Both types charge a 10% early withdrawal penalty if you take money out before 59½, with some exceptions.
Before you withdraw, know your account type, your age, how long you've held the account, and whether you have a reason that might waive the penalty. These details change what happens next.
Key Takeaways
- Traditional IRA withdrawals are taxed as income; Roth IRA withdrawals of contributions are tax-free, but earnings are taxed if you withdraw before 59½.
- A 10% early withdrawal penalty applies to both account types if you withdraw before age 59½, unless you meet a specific exception like disability, medical expenses, or a first-time home purchase.
- Contact your IRA custodian directly to request a withdrawal—they will ask whether you want the money sent to you or rolled over to another account.
- Withdrawals are reported on Form 1099-R, which your custodian sends to you and the IRS; you report this on your tax return.
- Some withdrawals can be rolled over to another IRA or retirement account within 60 days to avoid taxes and penalties.
Steps to request a withdrawal from your IRA custodian
Contact the institution holding your IRA—this is your bank, brokerage (like Fidelity, Vanguard, or Charles Schwab), or investment firm. Call their customer service line, log into your online account, or visit a branch in person. Tell them you want to withdraw funds and ask what forms they need.
Most custodians will ask you: how much you want to withdraw (a specific dollar amount or the entire balance), whether you want a check mailed to you or a direct transfer to your bank account, and whether you want federal income tax withheld. If you choose withholding, they will hold back a percentage (usually 10% to 20%) and send it to the IRS on your behalf; the rest goes to you. If you don't choose withholding, you will owe the full tax bill when you file your return.
The custodian may require a written request or a signature on a form. Processing time varies: some firms complete withdrawals in one to three business days, others take up to two weeks. Ask when you can expect the money.
Traditional IRA withdrawals and the tax bill
When you withdraw from a traditional IRA, the entire amount is taxed as ordinary income in the year you withdraw it. If you withdraw $10,000, that $10,000 is added to your other income for the year, and you pay income tax on it at your regular tax rate.
If you are under 59½, you also owe a 10% early withdrawal penalty on top of the income tax—unless you meet an exception. The IRS recognizes these exceptions: disability, medical expenses that exceed 7.5% of your adjusted gross income, health insurance premiums while unemployed, first-time home purchase (up to $10,000 lifetime), higher education expenses, and substantially equal periodic payments (a complex calculation that requires you to take the same amount every year for five years or until 59½, whichever is longer).
Your custodian will report the withdrawal on Form 1099-R, which they send to you and file with the IRS. You report this on your tax return (Form 1040) when you file. If you owe the penalty, you calculate it on Form 5329 and include it with your return.
Roth IRA withdrawals: contributions versus earnings
Roth IRA rules are different because you already paid tax on the money you put in. You can withdraw your contributions (the money you deposited) at any time, at any age, with no tax or penalty. The tricky part is separating contributions from earnings (the investment growth).
If you withdraw only contributions, there is no tax bill and no penalty, even if you are 30 years old. Your custodian can tell you how much you have contributed versus how much is earnings. If you withdraw earnings before age 59½ and you have not held the Roth IRA for at least five tax years, you owe income tax on the earnings plus a 10% penalty—unless you meet an exception (disability, medical expenses, first-time home purchase, or higher education).
The five-year rule applies to each Roth IRA separately. If you opened your first Roth in 2020 and your second Roth in 2023, the five-year clock started in 2020 for the first account and 2023 for the second. Once five years have passed on any Roth IRA you own, you can withdraw earnings penalty-free after 59½.
Early withdrawal exceptions that waive the 10% penalty
The IRS allows penalty-free early withdrawals in these situations: disability (you must be unable to work due to a physical or mental condition), death (your beneficiary or estate can withdraw), medical expenses (only the amount exceeding 7.5% of your adjusted gross income), health insurance premiums while unemployed (for at least 12 weeks), first-time home purchase (up to $10,000 lifetime, and you must not have owned a home in the past two years), and higher education expenses (tuition, fees, books, supplies, and room and board if you are at least a half-time student).
You still owe income tax on the withdrawal even if the penalty is waived. For example, if you withdraw $5,000 from a traditional IRA to pay medical expenses, you owe income tax on that $5,000, but not the 10% penalty. You report the exception on Form 5329 when you file your return.
Substantially equal periodic payments (SEPP) is another exception, but it is complex. You must calculate the amount you can withdraw each year using an IRS formula, take that exact amount every year for five years or until you turn 59½ (whichever is longer), and stick to it. If you change the amount or stop early, you owe the penalty retroactively on all prior withdrawals. Most people use this only with professional tax help.
Rollovers: moving money to another retirement account
A rollover moves money from one IRA to another IRA, or from an IRA to a 401(k) or similar workplace plan, without triggering taxes or penalties. You have 60 days from the date you receive the money to deposit it into the new account. If you miss the deadline, the withdrawal is taxed and penalized as a regular withdrawal.
There are two types of rollovers. A direct rollover means the custodian sends the money straight to the new account—you never touch it, and there is no 60-day clock. A indirect rollover means the custodian sends the money to you, and you deposit it yourself within 60 days. With an indirect rollover, the custodian must withhold 20% for taxes, even though you plan to roll it over. You have to make up that 20% from your own money to complete the rollover, or the withheld amount is treated as a taxable withdrawal.
If you have multiple IRAs, the IRS treats all of them as one account for the purpose of the one-rollover-per-year rule. You can do only one indirect rollover per year across all your IRAs combined. Direct rollovers do not count against this limit.
What happens after you withdraw: taxes and reporting
Your custodian files Form 1099-R with the IRS and sends you a copy by January 31 of the following year. This form reports the gross amount withdrawn, any withholding, and the code for the type of withdrawal. You report this on your tax return when you file.
If you had withholding, that amount is credited against your tax bill. If you owe more tax than was withheld, you pay the difference when you file. If more was withheld than you owe, you get a refund. If you did not choose withholding and you owe tax, you must pay it when you file or set up a payment plan with the IRS.
Keep records of the withdrawal: the date, the amount, the custodian's name, and any documentation of exceptions (medical bills, disability letter, proof of first-time home buyer status). If the IRS questions the withdrawal later, you will need to show why it was not penalized.
Frequently Asked Questions
Can I withdraw money from my IRA without paying taxes?
Yes, if you withdraw contributions from a Roth IRA—those are never taxed. Traditional IRA withdrawals are always taxed as income. If you meet an early withdrawal exception (disability, medical expenses, first-time home purchase), the 10% penalty is waived, but you still owe income tax on the amount withdrawn.
What happens if I need the money back before 60 days?
If you withdrew money intending to roll it over but changed your mind, you cannot undo the withdrawal. The money is yours to keep, but it is treated as a taxable withdrawal and you owe taxes and penalties (if applicable). Plan rollovers carefully and use direct rollovers when possible to avoid this risk.
Do I have to withdraw money from my IRA at a certain age?
Yes. Required Minimum Distributions (RMDs) begin at age 73 for traditional IRAs (this age changed from 72 in 2023). You must withdraw a calculated amount each year or pay a 25% penalty on the shortfall. Roth IRAs have no RMD during your lifetime, but beneficiaries must take distributions after you die.
What if I made a mistake on my withdrawal?
Contact your custodian immediately. If you withdrew too much or changed your mind, you may be able to roll the money back within 60 days. If you missed the deadline or the rollover was rejected, you will owe taxes and penalties on the amount. A tax professional can help you file an amended return if needed.
Can I withdraw from my spouse's IRA?
No. Only the account owner can withdraw from an IRA during their lifetime. After death, a spouse can roll the IRA into their own IRA or take distributions as a beneficiary, depending on the account type and the deceased's wishes.