An IRA is designed to help you save for retirement. But should you ever tap into it earlier?

Ideally, you should keep it intact until you retire. However, life is unpredictable, and you may encounter situations in which you’ll consider taking money from your IRA.

In most cases, though, if you touch your account before you turn 59½, you’ll face taxes and a possible 10 percent penalty. If you have a Roth IRA rather than a traditional IRA, you can always withdraw your contributions without taxes or penalties, but the earnings may be taxed and penalized if you’re younger than 59½.

If you need to withdraw funds from your IRA before you’re 59½, you may be able to avoid the 10 percent early withdrawal penalty if you meet an exception, such as one of these:

Paying for college — You are allowed to take penalty-free withdrawals to pay for tuition and other qualified higher education expenses for you, your spouse, children or grandchildren. However, since the withdrawals may be considered taxable income, they could reduce the student’s eligibility for financial aid.

Buying a first home — You and your spouse can each withdraw up to $10,000 from your respective IRAs to buy your first home. To qualify as a first-time homebuyer, you and your spouse need to have not owned a home for the two years preceding your home purchase.


Having a child — Following the birth or adoption of a child, you and your co-parent can each withdraw up to $5,000 from your respective IRA without paying the 10 percent penalty.

Covering medical expenses — You may be able to avoid the early withdrawal penalty if you use the money to pay for unreimbursed medical expenses for you, your spouse or your dependents that exceed 7.5 percent of your adjusted gross income. You may also qualify to take a withdrawal without penalty to pay for health insurance premiums if you are unemployed. In the case of a disability, the 10 percent early withdrawal penalty also may not apply.

Keep in mind, though, that you do have ways to potentially reduce the necessity of withdrawing from your IRA early.

One proven technique is to build an emergency fund containing at least three to six months’ worth of living expenses, with the money kept in a liquid account. You might also consider opening a line of credit. A financial professional can help you explore other options, as well.

Ultimately, if you can leave your IRA intact until you retire, you’ll be helping yourself greatly. But if you do need to tap into your account early, at least be familiar with the possible drawbacks — and how you might avoid them.

This article was written by Edward Jones for use by Chet Osterhoudt, a local Edward Jones financial advisor.