Types

• The IRS allows individuals to take money out of their IRAs at any time. However, not all IRA distributions are qualified distributions. When you are taking money out of a tax-deferred IRA, you must wait until you are at least 59-1/2 to take a qualified withdrawal. With a Roth IRA, you must be at least 59-1/2, and your account must have been open for at least five years. The start date of your Roth IRA is Jan. 1 of the tax year you made your first contribution. For example, if you first contributed in the 2006 tax year, the age of the account would be counted from Jan. 1, 2006.
  
  

Early Withdrawals

• All early withdrawals from traditional IRAs are taxable and potentially subject to a 10 percent early withdrawal penalty. For Roth IRAs, only earnings are subject to taxes, and the 10 percent early withdrawal penalty and earnings only come out of the account after all of the contributions have been removed. For example, if your Roth IRA is worth $40,000 and you have $30,000 of contributions, you would be able to withdraw $30,000 penalty-free and tax-free at any time. Only after that $30,000 has been withdrawn would the remaining $10,000 be subject to taxes and penalties.
  
  

Penalty Exceptions

• In some cases, the IRS waives the 10 percent penalty on early withdrawals. You can avoid the 10 percent early withdrawal penalty if you use the money from the early distribution because of a permanent disability, for medical bills greater than 7.5 percent of your adjusted gross income, college costs or up to $10,000 for your first home purchase. In addition, for Roth IRA accounts that have been open for at least five years, the income taxes on earnings are waived if you use the money for your first home purchase or because you have a permanent disability.
  
  

Tax Treatment

• Qualified withdrawals from your traditional IRA account are added to your taxable income for the year and taxed as ordinary income. Qualified withdrawals from Roth IRA accounts are not taxable. When you take a distribution from an IRA, you will receive Form 1099-R which shows your total withdrawal and the taxable portion of the withdrawal. You must file your taxes using either Form 1040 or 1040A to document the distribution.
  
  

Required Distributions

• Roth IRAs do not require you to take distributions from the account at any time. However, tax-deferred IRAs require you to start taking distributions starting in the year that you turn 70-1/2. The IRS has several life expectancy tables that are used to figure how long the account is expected to last. The value of the account as of Dec. 31 of the prior year is divided by the life expectancy to determine how much you must withdraw per year.