Early Withdrawal and Disability

Early Distribution

To discourage the use of IRAs for purpose other than retirement, the law imposes a 10% additional tax on early distributions from traditional and Roth IRAs unless an exception applies. Generally, early distributions are those you receive from an IRA before reaching age 59½. The 10% additional tax applies to the part of the distribution that you have to include in gross income. It is in addition to any regular income tax on that amount.

Distributions that you roll over or transfer to another IRA or qualified retirement plan are not subject to this 10% additional tax.

There are exceptions to this 10% additional tax for early distribution that are:

– Made to a beneficiary or estate on account of the IRA owner's death

– Made on account of disability

– Made as part of a series of substantially equal periodic payments that are not less frequently than annually for your life (of life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary

– Qualified first-time homebuyer distributions

– Not in excess of your qualified higher education expenses

– Not in excess of certain medical insurance premiums paid while unemployed

– Not in excess of your unreimbursed medical expenses that are more than a certain percentage of your adjusted gross income

– Due to an IRS levy, or

– qualified reservist distribution

IRS Definition of Disabled

"You are considered disabled if you can furnish proof that you cannot do 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 be of long, continued, and indefinite duration."

Refer to Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs), for information on these exceptions. (http://www.irs.gov)

Please call a Retirement representative at 800-544-6666 for more information.