If you are under 59 ½, you generally must pay the 10% penalty on withdrawals from a traditional IRA. But, as the case with plan distributions, the tax law has carved out certain exceptions, including:
· Annuity-like payments
· Withdrawals due to death or disability
· Withdrawals used to pay deductible medical expenses (i.e., those expenses in excess of 7.5% of AGI)
· Withdrawals used to finance a qualified home purchase (up to a lifetime limit of $10,000)
· Withdrawals used to pay qualified higher education expenses
· Withdrawals used to pay health insurance during unemployment
The rules to avoid a penalty from an IRA withdrawal can be tricky. So be sure to check with your tax advisor.