How much you will pay in taxes on an individual retirement account (IRA) withdrawal depends on the type of IRA, your age, and the purpose of the withdrawal. Sometimes the answer is zero—you owe no taxes. In other cases, you owe income tax on the money you withdraw and sometimes an additional penalty if you withdraw funds before age 59½. On the other hand, after a certain age, you may be required to withdraw money and pay taxes on it.

There are a number of IRA options and a variety of places to open these accounts, but the Roth IRA and the traditional IRA are by far the most widely held types.

The withdrawal rules for other types of IRAs are similar to the traditional IRA, with some minor unique differences. Other types of IRAs are the SEP-IRA, Simple IRA, or SARSEP IRA. Each has different rules about who can open one.

KEY TAKEAWAYS
Only Roth IRAs offer tax-free withdrawals.
If you withdraw money before age 59½, you will be assessed a 10% penalty in addition to regular income tax—unless you fit one of the tax exceptions or are withdrawing Roth contributions (not earnings).
At age 72, you are required to withdraw money from every type of IRA but a Roth—whether you need it or not—and pay income taxes on it.
Tax-free Withdrawals: Roth IRAs Only
When you invest using a Roth IRA, you deposit the money after it has already been taxed. When you withdraw the money in retirement, you pay no tax on the money you withdraw—or on any gains your investments earned, a significant benefit. To take advantage of this tax-free withdrawal, the money must have been deposited in the IRA and held for at least five years and you must be at least 59½ years old. The other term for an IRA withdrawal is distribution.1

If you need the money before that time, you can take out your contributions with no tax penalty so long as you don’t touch any of the investment gains. Keep a careful log of the money withdrawn prior to age 59½, and tell the trustee to use only contributions if you’re withdrawing funds early. If you do not do this, you could be charged the same early withdrawal penalties charged for taking money out of a traditional IRA.

“For a retired investor who has a 401(k), a little-known technique can allow for a no-strings-attached withdrawal of a Roth IRA at age 55 without the 10% penalty,” says James B. Twining, founder and CEO of Financial Plan Inc., in Bellingham, Wash. “The Roth IRA is ‘reverse rolled’ into the 401(k) and then withdrawn under the age 55 exception.”

Knowing you can withdraw money penalty-free might give you the confidence to invest more in a Roth than you’d otherwise feel comfortable doing. If you really want to have enough for retirement, it is of course best to avoid withdrawing money early so that it can continue to grow in your account tax-free.

When IRA Withdrawals Are Taxed
Money deposited in a traditional IRA is treated differently from money in a Roth. This is because you deposit pretax income—each dollar you deposit reduces your taxable income by that amount. When you withdraw the money, both the initial investment and the gains it earned are taxed at your income tax rate in the year you withdraw it.

However, if you withdraw money before you reach age 59½, you will be assessed a 10% penalty in addition to regular income tax based on your tax bracket.1 There are some exceptions to this penalty (see below). If you accidentally withdraw investment earnings rather than only contributions from a Roth IRA before you are 59½, you can also owe a 10% penalty. It is crucial to keep careful records.

Ways to Avoid the Early Withdrawal Tax Penalty
There are some hardship exceptions to penalty charges for withdrawing money from a traditional IRA or the investment-earnings portion of a Roth IRA before you reach age 59½. Common exceptions for you or your estate include:1

Required distribution as part of a domestic relations order (in a divorce)
Qualified education expenses
Qualified first-time home purchase
Disability of the IRA owner
Death of the IRA owner
An Internal Revenue Service levy on the plan
Unreimbursed medical expenses
A call to duty of a military reservist
One other way to escape the tax penalty: This video was created from this article ( )…(read more)

LEARN MORE ABOUT: IRA Accounts

CONVERTING IRA TO GOLD: Gold IRA Account

CONVERTING IRA TO SILVER: Silver IRA Account

REVEALED: Best Gold Backed IRA