You can avoid an early deduction penalty if you use the money for unreimbursed medical expenses that make up more than 7.5% of your adjusted gross income (AGI). In general, an early payout from an individual retirement account (IRA) before the age of 59½ requires it to be included in gross income, plus an additional 10 percent tax penalty. There are exceptions to the 10 percent penalty, such as using IRA money to pay your health insurance premium following a job loss. For more information, see Difficulties, Early Withdrawals, and Loans.
The IRS allows fine-free withdrawals before the age of 59½ for Special Equal Periodic Payments (SEPP). Under these plans, you can get a regular annual payout for five years or until you reach 59½, whichever comes later. Husbands and wives who inherit the IRA and choose to have the money transferred by the spouse to their own IRA would be subject to the advance payment penalty (if they are under 59½ years of age). Contributions to a Roth IRA can be withdrawn at any time, and there are no penalties or taxes (if the Roth IRA has been around for five years).
