JOURNAL OF IDEAS TODAY: 7 WAYS TO AVOID WITHDRAWAL PENALTY FROM YOUR TRADITIONAL IRA

By JC Leahy
Maximum Legal Refund (tm)
Taxes Minimized to Your Best Advantage (tm)
jcleahy@jaitoday.com

So you are thinking of withdrawing money from your traditional IRA but you think you'll have to pay a 10% early withdrawal penalty? Think again! Aside from making an IRA rollover (which we all know about and really does not help with cash-flow NOW) there are 7 other exceptions to the age 59 1/2 early-withdrawal IRA peanlty rule:

Medical Expenses - If your unreimbursed medical expenses are more than 7.5% of your adjusted gross income, you may take an IRA withdrawal without paying the 10% tax penalty.
Medical Insurance - If you lost your job, received unemployment compensation and paid for medical insurance and your family, then you might be able to withdraw from your IRA the amount equal to what you paid for the insurance provided you did not receive the IRA distribution more than 60 days finding a new job.
Disability - If a physician determines that you are totally disabled from gainful employment due to physical or mental conditions, you can make IRA withdrawals without paying the 10% tax penalty.

In Case You Die - If you die before age 59 1/2, then your IRA can be distributed to your beneficiaries or estate without paying the penalty. It goes without saying that this is the least desirable way to escape the early withdrawal penalty.
College Expenses - If you paid expenses for higher education, part (or all) of any distribution for that year may not be subject to the 10% penalty.
First Time Homeowner - If you use the money to purchase, rebuild or build your first home you can make an IRA withdrawal without paying the 10% penalty. The distributions are limited to $10,000. The money must be withdrawn within 120 days after making the purchase. :
Annuity Distributions - Anyone can use this one. You can take the withdrawal in little chunks monthly without paying an early-withdrawal penalty. In effect, you are setting up your own, private annuity. You must use an IRS approved method to calculate these chunks. They must be equal payments and they must continue for at least 5 years or until age 59 1/2, whichever is later. There is a one-time change you can make in the amount of the withdrawals.