You may encounter certain financial situations making it necessary to withdraw funds from your IRA account. Funds withdrawn from a Traditional IRA are taxed at the regular income tax rates AND are subject to a 10% early withdrawal penalty if you are under 59-1/2 years of age at the time of the withdrawal. However, in addition to death, there are exceptions to this 10% penalty when you meet certain conditions or the funds withdrawn are used to pay certain qualified expenses. But remember even if you avoid the penalty with one of the following exceptions, the withdrawal is still taxable for regular tax purposes.

• Higher education expenses such as tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a qualified student at an eligible educational institution. In addition, if the individual is at least a half-time student, room and board is a qualified higher education expense.
  
• First-time homebuyer acquisition costs (within 120 days of the distribution) for the main home of a first-time homebuyer that is the taxpayer, spouse, child, grandchild, parent or other ancestor. The distribution is limited to $10,000 and if both husband and wife are first-time homebuyers, they each can withdraw up to $10,000 penalty-free.
  
• Unreimbursed medical expenses, that are not more than: 1) The amount you paid for unreimbursed medical expenses during the year of the withdrawal, minus 2) 7.5% of your adjusted gross income for the year of the withdrawal.
  
• Medical insurance premiums that you made as a result of becoming unemployed.
  
• Disability - you are considered disabled if you cannot perform any substantial gainful activity because of your physical or mental condition. A physician must determine that your condition can be expected to result in death or to last for a continued and indefinite duration.
  
• Annuity distributions - if you retire before reaching the age of 59-1/2, you can avoid the penalty provided that the withdrawals are part of a series of substantially equal payments over your life (or your life expectancy), or over the lives (or joint life expectancies) of you and your beneficiary. The payments under this exception must continue for at least 5 years, or until you reach the age of 59-1/2, whichever is the longer period.

The foregoing is a brief synopsis of the exceptions to the early withdrawal penalty. The rules pertaining to these exceptions are extensive and you are cautioned to consult with this office prior to making any withdrawals to insure you qualify under the more detailed requirements.