Traditional or Roth

• The two types of IRA structures are the traditional IRA and the Roth IRA. Contributions to a traditional IRA are deducted from annual income, and the money is taxed when it is withdrawn. The Roth contributions are not deducted from taxable income, but withdrawals from a Roth are not taxed under normal distribution circumstances. There is no limit to the amount you can distribute without penalty when you meet normal distribution eligibility.
  
  

Early Distribution Rules

• The IRS discourages early distributions by assessing a 10 percent tax penalty on the money withdrawn early. Early distributions for a traditional IRA are any funds taken out prior to age 59 1/2. Early distributions for a Roth IRA have the same age threshold with a second requirement. The Roth must be funded for at least five years before you can access penalty-free funds, regardless of your age. The money contributed to the Roth is after-tax money, so it won't be taxed even in early distributions. However, the earnings withdrawn early from a Roth are added to income and penalized. Fidelity and the IRS have no limits on the amount you can distribute. Keep in mind, however, that whatever you add to your income through IRA withdrawals might bump you into a higher tax bracket, creating a higher tax liability on all your annual income.
  
  

Standard Withholding

• The IRS mandates that all IRA custodians, including Fidelity, withhold 10 percent on traditional IRA distributions. Roth IRAs don't have mandatory withholding. If you have a U.S. residential address, you can elect to have no withholding on the IRA distributions. This doesn't mean you do not have to pay those taxes. Fidelity will send you a 1099-R in January to reflect the taxable distribution that must be recorded when filing personal income taxes for the year.
  
  

Fidelity Penalties

• Funds within Fidelity IRAs are allowed to buy more than just Fidelity mutual funds. If you have stocks, bonds or other mutual funds investments, there may be a fee for liquidating the investment prior to distributing the IRA assets. Call your Fidelity representative to gain a complete understanding of any fees required when selling assets and distributing them. It is better to obtain this information to properly prepare rather than receive a check for less than you expected.