Many companies featured on Money advertise with us. Opinions are our own, but compensation and
in-depth research determine where and how companies may appear. Learn more about how we make money.

By timestaff
May 20, 2014

The government wants to discourage you from raiding your IRA until you're retired. (It's a retirement account, after all.)

If you withdraw money from a traditional IRA before you turn 59 ½, you must pay a 10% tax penalty (with a few exceptions). That’s on top of paying regular income taxes on that cash. The same 10% penalty applies if you withdraw investment earnings from a Roth IRA before 59 ½.

The exceptions involve cases in which you use the withdrawal to pay for college expenses, to buy your first home (up to $10,000) or for medical expenses greater than 7.5% of your AGI (adjusted gross income), or in case of disability.