Roth IRA

• Because you have already paid income tax on money contributed to a Roth IRA, you can withdraw your contributions at any time without penalty. However, strict rules apply to your withdrawal of earnings. To avoid penalties and excess taxes, you must meet two requirements for qualified distributions. You must have held the account for five years and be at least 59 1/2 years old. The IRS may waive the age requirement if you are a first-time home buyer, if you become disabled or if the money is paid to your beneficiary on your death.
  
  

Traditional IRA

• You can begin to take money out of a traditional IRA at 59 1/2. You will be required to pay ordinary income tax on whatever amount you withdraw because contributions into a traditional IRA are tax deductible.
  
  

Age Limit Exceptions

• There are a few exceptions to the age limit for withdrawals. If you are younger than 59 1/2, you can withdraw up to $10,000 for a down payment on a home, but only if you have not purchased another home in the past two years. If you withdraw more than $10,000, you will have to pay a 10 percent penalty. You can also withdraw money, penalty-free, for paying medical expenses greater than 7.5 percent of your adjusted gross income or if you become disabled. Under certain conditions, you can use the money for educational expenses for yourself or an immediate family member.
  
  

Premature Distribution

• The IRS has set up the equally substantial distribution, or 72(t), rule to enable those younger than retirement age to take money out of their traditional IRA. You must follow all of the rules to avoid the 10 percent penalty, and there are many. The IRS provides a mortality table to determine the amount you would have to withdraw each year. You must then withdraw the determined amount for five years or until you reach 59 1/2, whichever comes later. You can set this up with your investment firm. This works well for those who wish to retire early. You will have to pay tax on the money withdrawn but no other penalties will apply.