If the individual wishing to withdraw from an IRA is under the age of 59 1/2 and does not want to face a 10 percent tax penalty, the withdrawal must go toward a major expense, such as college tuition, says CNN Money. The individual can also withdraw a former contribution.Continue Reading
One major expense is college, which does include the tuition of the individual but can extend to the tuition costs of his spouse, children or grandchildren, according to CNN Money. The money from the withdrawal can also be used for outstanding medical bills that total more than 7.5 percent of his adjusted gross income or toward a loan of no higher than $10,000 for a down-payment on his first home, as of 2015. The penalty may also be waived if the individual withdrawing from the IRA is withdrawing as the result of a sudden disability.
Individuals who have contributed toward an IRA can withdraw the contribution on a one-time basis, claims CNN Money. However, the penalty is waived only if he withdraws before the tax filing deadline and does not include it as a deduction.
The final way an individual can avoid paying a penalty on the withdrawal from an IRA is by rolling the money into a similar retirement fund, says CNN Money. However, the rollover must occur within 60 days of the initial withdrawal, and the money cannot be used to pay for outstanding expenses.Learn more about Financial Planning