IRA Withdrawals Made Easy

FinanceTax

  • Author Frank Vanderlugt
  • Published September 18, 2007
  • Word count 439

There are certain IRS regulations according to which the company personnel are allowed to make IRA withdrawals from 401(k) before they have reached the requisite age limit of 59 'bd. All IRA withdrawals made before you have reached the targeted age from your 401(k) account are subject to 10% tax of the amount that you have withdrawn. There are, however, certain IRA withdrawals defined under section 213 of the Internal Revenue Code which allow funds to be extracted for medical purposes before the permissible age is achieved.

You can make IRA withdrawals under certain given conditions. However, you will have to pay the taxes mentioned above. These conditions are called hardships under the IRS tax code. The six hardships are:

  1. For buying your first house.

  2. In order to avoid foreclosure of or getting evicted from your primary residence.

  3. Paying for educational expenses incurred in period of previous 12 moths,

  4. Uninsured medical expenses.

  5. Funeral expenses.

  6. For home repairs under certain conditions.

While there are six different hardships defined, your employer may not allow certain conditions; and if you are really unlucky, all the conditions defined might not be honored by your employer. Since you are getting tax benefit, the government requires a minimum level of funds to be maintained in such retirement investment schemes. Thus if you want to make IRA withdrawals you will have to ensure that you have money in other tax benefit schemes in order to maintain the minimum figures. If you are making IRA withdrawals in a manner in which your minimum level ceiling gets breached, you will be made to pay a 10% penalty tax provided that you have not completed the age of 59 'bd years.

This 10% penalty will be levied in addition to the income tax which you will have to pay for the money that you get as IRA withdrawal. In case of employee's death or becoming totally and permanently disabled, however the 10% penalty on early IRA withdrawal will not be applicable. Among other conditions, the employee leaving the current position after the age of 55 will also amount to a condition when the 10 % penalty on IRA withdrawal gets waived off.

IRA withdrawals are also allowed in the form of loans. You can take certain amount of loans in the form of IRA withdrawals provided you pay them back with tax paid income. The market rates are applicable to this loan amount just like the way it is with any other loan. The benefit here is that not only will your actual amount in the funds will remain unaffected, you will not be paying any income tax or the 10% penalty on the IRA withdrawal in the form of loans.

Frank j Vanderlugt owns and operates http://www.ira-information-now.com Ira Information

Article source: https://articlebiz.com
This article has been viewed 1,184 times.

Rate article

This article has a 4 rating with 1 vote.

Article comments

There are no posted comments.

Related articles